Good morning, ladies and gentlemen. Please welcome Adam David, Vice President, Investor Relations, Pitney Bowes.
Well, good morning, everyone. Thank you so much for coming. Before we get started, I just want to spend a second on the day. So Mark is going to lead us off. We'll then have our Business Unit Presidents come up and speak about their respective areas.
So Jason Dyes will talk about SMB Christopher Johnson, Financial Services Bob Gaudati, Software and Lila Snyder, Commerce Services. We'll then take a short break. Stan will then come up and take everyone through the financials, and we'll open it up for Q and A. We've also included disclosures in this presentation around forward looking statements and the use of non GAAP measures. I'd ask that you read through that at your convenience.
So with that, let's get started. I'm pleased to introduce our President and CEO, Marc Lautenbach.
Thank you. Good morning. Let me add my thanks to Adams for your participation this morning. This is an important opportunity for us to refresh our message. We think we've got a lot of exciting things to talk about, and we're particularly anxious to learn from your questions and your comments.
I'm going have a slightly different cast to my comments than typical. Yesterday, Wachtel Lipton put out what was an interesting piece, and the gist of the piece was around corporations' focus on the long term. And subordinate to that thought is how is it that corporations thought about stakeholder management. This piece was in reaction to something that the SEC Chairman Clayton put out last week on long term focus of corporations. And I'm going to ask Adam to put the piece from Chairman Clayton on our IR side because I think it's important.
And it's important in the following sense. It is in large part how it is we think about running the corporation. And Chairman Clayton as well as Wachtell Lipton join a chorus of investors. The retail side, in particular, goes a little bit more silent, but the index funds, in particular, have more and more spoken about the importance of a long term view of how corporations manage their businesses, and we agree. Four weeks ago, Pitney Bowes celebrated our ninety ninth anniversary.
Said another way, Pitney Bowes began its one hundredth year of business, and that puts us in a very short list of companies that have enjoyed that kind of tenure. So Pitney Bowes, by definition, has been a corporation that's been focused on the long term, not just over the last couple of years, but for the last one hundred years. And the point that I would make about our focus on the long term is this isn't a story of what's going to happen in the next five or six years. This is a story that you're going to hear about this morning of what's happening right now. And the evidence of the success and the efficacy of our investments is found in the revenue growth, and it's found in some of the other measurements and the other items that we'll talk about today.
And you'll see it in the various conversations from the business unit presidents as well as Stan. For those of you who are only going to stay for the first ten minutes, let me summarize the messages for today. The first is you will walk away with a very clear view that we are purposely building long term value for the corporation. Second, revenue growth will improve as the portfolio continues to move to growth markets. In 2016, the title of our annual report was poised for growth.
2017, we grew 2018, we grew again, marking the first time in a decade that the company had grown in two consecutive years. And in fact, our growth in the fourth quarter was the best growth that we had achieved in ten years. That trend of revenue growth will continue as the mix of our business changes. So Commerce Services in the first quarter became our largest revenue segment. And as the mix of the businesses change, and we made this point last year, revenue growth will accelerate.
Importantly, it's revenue growth that comes with profit growth. Lyle will take you through this in detail, but our plan calls for Global Ecommerce to become profitable next year. And coupled with that thought, SMB, which had been loosely characterized as a melting iceberg, will grow profit in 2021 according to our plan. And throughout the course of the plan, and we're going to be specific about the timing, both earnings and cash will grow over the course of our plan to 2022. It would be a touch tone deaf to talk about our long term plan and our long term activities without making a brief comment about the first quarter.
So to say the least, the first quarter was a disappointment and a deviation from what we expected. But here's the point, and I'll tie it to our comments and our thoughts on long term. If you really do the forensics on what happened on the first quarter, and we have with a very critical eye, there were three things that happened. The first, our best performing business probably over the last decade, Presort, had a difficult quarter. To some degree, we had seen aspects of this coming for a while, and many of the corrective actions that will remediate those problems were already in flight.
But Presort had been a business that had been a reliable producer of results. It's got the highest market share in a difficult market. It's got the best margins. It's got great client satisfaction, and it's got very high employee engagement results. So while we were disappointed with the results of Presort, it was, by any measure, an aberration from what the long term trend was.
The other two issues, the battery issue that we had in our SMB business as well as the delay of the NSA, were clearly one off kind of issues. But here's the broader point. The broader point is you begin to understand what happened in the first quarter. None of those dynamics undermine our thesis for the long term. They were unfortunate.
We own them, but they do not change our long term thesis for the business. I want to spend a second about how we think about transformations. And this is important. And the term transformation is, I would say, thrown around rather promiscuously within the business industry and, to a degree, within the investment world. And I would characterize it as a contrast from a turnaround.
If you think about what a turnaround is, at least from my way of thinking, would characterize it as a turnaround as a company that's participating in markets that have growth but isn't performing. A transformation is a company that's participating in markets that are going through secular decline. And the difference is this: if you're trying to turn around a company, it's all about improving performance. If you're trying to transform a company, you need to change the underlying complexion of the enterprise. So where was this company in 2012?
In 2012, the company had experienced its fifth consecutive year of mid single digit decline. 2007 to 2012, the company had declined 5% or 6%. Why was that? Was it because the company was underperforming? No.
It was simply because that 85% to 90% of the company's revenue was in the mail market. In large part, the company was performing within the boundaries of what that market was providing. The problem is if you're trying to secure another 100 for the company, that story has a very predictable and candidly conclusion that we were not willing to sign up for. Underneath that, underneath that, the company had made close to 100 acquisitions from 2000 to 02/2008, partially to begin to address moving the company to different markets, partially to chase growth. But in that time period, in those 90 plus acquisitions, the company acquired $400,000,000 of revenue.
And in 2008 still had $400,000,000 of revenue. So underneath the secular declines that the company was fighting against, the balance sheet was very strained. So your degrees of freedom, if you think about how it is that companies move themselves to markets of growth, there's a couple of ways you can do it. You can do it through innovation, and I'll come to that in a second. You can do it through taking on debt.
Those opportunities, in large part, were not available to the company. So as you think about Pitney Bowes over the last five or six years, understand the difference between a turnaround and a transformation is really important. With that as background, there's a couple of points I want to make about transformation. And these are points that you can find in the general literature. BCG happens to have an article, which I think is largely on point with how we think about transformations.
The first is few transformations succeed. At a very personal level, I started with IBM in 1985. The biggest competitors IBM had in 1985, Wang, Burrows, Amdahl, Hitachi, Compact Digital go through the list. Ten years later, none of those companies existed or if they did exist, they existed in the context of a broader enterprise. More generally, if you look at the Fortune 500 today and you look back fifty years, less than 70 of those companies that are in the Fortune 500 today were there fifty years ago.
It underlines the difficulty that companies have transforming themselves. And there's lots of different reasons why that is. But the fundamental point is it's a difficult journey. There's a couple of other characteristics that BCG points out as it relates to successful transformations. One is the importance of culture, and I'm going come to this.
And it is a poorly understood but critically important component of culture. And it's something that we don't spend enough time talking about with our investors because as you look at the characteristics of what makes successful transformations, culture may be one of the most important characteristics of successful transformations. Balance short term and long term. This is something that I get, and it's particularly true within companies in the public context. And candidly, as part of the tension that Commissioner Clayton points to Chairman Clayton, rather, points to in his letter last week about long term investing.
In it, wonders and kind of postulates why is it there are fewer public companies today than there were ten years ago? And his conclusion, which he hypothesized, which I agree with, is the reason there are fewer public companies today than there were a decade ago, and it's a meaningful difference, is that this tension between long term and short term precludes companies in the public context of doing the necessary things that they need to do in order to transform themselves. Continue to invest in the business. You'll see this in a minute, but this makes the basic point that if you're going to transform the company, you have to invest in the business, and you have to invest in a particular way. You have to invest in a sustained way.
And here's how this dynamic tends to go. Company gets into their one year, three year, five year plan. Inevitably, something happens. Either there's an execution issue, there's a market issue, there's a battery issue. And what happens?
Companies will pull back on investment. They'll pull back on the investments in R and D. They'll pull back on the investments in systems. They'll pull back on the investments in products. And what I would say to you with the benefit of running businesses and companies now for decades is if you're going to have successfully sustained investment, you can't go back and forth.
You have to sustain those investments. It's hard to do, I would assert impossible to do, if you're chasing quarters or years. Finally, revenue growth is the biggest factor for success. There are, I would suggest broadly, a couple of different theories of value creation in the marketplace right now. And this is evolving.
So I'll characterize one theory of value creation around the theory of Kraft Heinz. And by the way, this is a theory which is held by really smart, successful investors. And to a degree, it works, but it only works for a period of time. And the theory goes like this. The theory goes that we will put like companies together.
In our case, that would be like companies that were going through secular decline, And those companies will find synergies. They'll find synergies in the back office. They'll find synergies in development. They'll find synergies in go to market. And that will provide value creation over some number of years.
But here's the problem. The problem is after some number of years, what you're left with is a company that's going through a bigger company that's going through more secular decline. Said another way, if you're really thinking about the long term as we are, you can't save your way out of this problem. You've got to grow your way out of this problem. And that's why we talk about revenue growth the way that we do.
And one of the challenges we get, and I would encourage you to challenge us on this again this morning, is you're chasing revenue growth at all costs. I understand why people think that, but it's not the case. We're pursuing revenue growth in a way that we see a path to profitability that will allow us to transform this company. So what's our theory of the case of how it is we think about creation of long term value? It's these eight factors: strategy, innovation, culture, clients, employees, governance, board, community, financial stewardship.
And importantly, driven by your view of the brand. And I'm going to spend a second on this right now because I'm going to get to the other eight in a moment. Brand is important in the following way. The brand is important for us and I think for others because it informs who you are and who you want to be. People look at the advertising that we did in 2015 or 'sixteen, and they point to that as a memorable moment for Pitney Bowes because it was something we hadn't done in twenty years.
And it was, in that sense, an important milestone. But I tell you the enduring part of that work wasn't the advertising. It was clarity on who we are and clarity on who we want to be. And the point is this: when companies transform themselves, the common mistake that they make is they overreach. They try to be something that they don't have permission from the marketplace to be.
And that's why the brand is so important to our way of thinking about how we transform the company. We talk a lot about strategy. And in fact, if you go back over my previous remarks and other Analyst Day, it was all about strategy. And strategy is important. But what I would tell you is while strategies are important, they're not differentiable in the sense that other people can copy strategies over a short amount of time.
And in fact, you see that. You see some of our most prominent historical competitors copying our strategy, which, to a degree, we think is quite flattering. But the point is this: while strategies are important, the ability to execute the strategy is even more important. And if you think about our strategy in that context, Pitney Bowes for almost one hundred years had made its reputation on taking the complexity out of mail. Taking the complexity out of mail.
What are we aspiring to be? Continuing, for sure, to take the complexity out of mail. We're not walking away from that business. We think that's going to continue to be an important aspect of who we are and what we do, but a very close adjacency, shipping, taking the complexity of shipping. What Lyle will talk about is a handful of use cases: cross border, returns, how it is clients track their purchases and their shipping.
Some of the most vexing and difficult use cases in shipping and the one that's become the holy grail within the industry today of how is it that you compete with Amazon to provide one or two day or three day date certain affordable delivery. Every retailer, every marketplace around the world now has to have a point of view, not just a point of view but an action plan to be able to compete with what has become a service level that is almost a given within the industry. Operational excellence. Operational excellence is something we'll never be done with. When I joined Pitney Bowes in 2012, the CFO told me, we've saved all the money we can save.
And to a degree, the company had taken out $300,000,000 of expense at that point. Well, dollars 400,000,000 later, what I would tell you is we're still not done. Operational excellence will always be a hallmark and a characteristic of a great company. And if you look at the operational plans, particularly in SMB and Commerce Services, operational excellence is prominent within their respective plans. Leverage economies of scale and experience.
This is a fancy term, and I want spend a second on it to kind of explain this because it's important to how we think about something that's very fundamental, and that is what is your right to win? It's one thing to say, I want to be a prominent player. And what I would argue is within the world of shipping, we're not a prominent player within the broad world of shipping. We're a prominent player within some very specific use cases, the specific use cases where we think we have competitive advantage. And leveraging scale and experience is all about your right to win.
So let's uncouple those two. First, economies of experience. Well, if you think about or economies let's start with economies of scale. If you think of scale, we think of scale in a couple of different dimensions. The first is the number of countries we participate in.
When I started with Pitney Bowes, we operated in close to 100 countries. Today, substantively, we operate in about 10 countries, places where we have scale, places where we have critical mass. Second dimension of scale that we think about is in terms of clients. And again, lots of different ways to think about this, but the easiest way to think about scale as it relates to clients is in our SMB business, where we have hundreds of thousands of clients. And we have hundreds of thousands of clients, but importantly, we tend to sell them just one thing.
And that creates a tremendous opportunity because you've already incurred the cost of client acquisition. The third dimension of scale that's important to us is around technology. If you think about Pitney Bowes, and one of the things we think about all the time is what is the theory of the case of why these units are better together versus should they be three separate companies or four separate companies. And that drives you to the actions of how it is that you make these businesses accretive to one another, how you make them advantaged to one another. So whether it be Commerce Cloud or our technology platforms or infrastructure platforms, all of the businesses ride off of a common technology chassis.
That provides scale to these businesses that they would not be able to achieve, not be able to afford if they were stand alone businesses. The fourth the next comment I'd make about scale is where we can't find scale and we have aspects of our software business, candidly, that we lack scale, we'll partner for it. So that's why and Bob will talk a lot about our partnership strategies, and those are important because they're viable ways to take our products to market, but they also offer us scale that we would not be able to achieve on our own. Experience. Economies of experience.
The first thing I would say, quite simply, is the space between mailing and shipping is not a big space. So much of the learnings that we have earned over the last one hundred years in the mail market serve us remarkably well as we think about moving to the shipping market, particularly, and Lilo may talk about this a little bit. If not, we can take in questions and answers. If you think about our knowledge of how mail moves, we know, in particular, lanes, how long it takes a mail piece to get from point A to point B. We know that because our Presort business moves 25% of the mail in The United States.
That insight of knowing how long it takes a piece of mail to get from point A to point B is an incredibly valuable insight in the shipping business when you're trying to offer date certain delivery. So experience in our mail is highly leverageable to our desire to be a winner in the shipping market. The second point where we leverage experience, and Lyle will talk about this very explicitly, is our presort business. If you think about our Presort business, which has now become, as I said at the outset, one of our most successful business, it started out in many ways very similar to Global Ecommerce, a small business, subscale that we invested in the network over a period of time to create the kinds of scale that you needed in order to be successful in that business. That same recipe that has made Presort such a successful business, a market leader, is precisely the same recipe that we're using in our Global Ecommerce business to drive to profitability.
The third dimension of experience that's important, I talked about this at outset, was around client experience. And you see this particularly in our GFS business, our financial services business. We have decades of credit history on hundreds of thousands of clients in this country and around the world. Why is that important? If you think about right to win in the Financial Services business, there's two impediments.
The first is the cost of client acquisition is incredibly expensive. Well, we've already incurred that. The second factor that tends to disqualify most competitors and most entities in the Financial Services business is credit risk. We have decades. We have decades of credit history with very low default rates in our core Financial Services business.
Taking that experience that we have earned with those clients over the last decades and applying it to new market gives us the right to win. And that's why economies of scale and experience are so important to us because you can talk about in very fancy kind of academic terms, but in the end, it's about what is your right to win. And in every one of the businesses that we're in today, we think we have the right to win. And that drives how we think about what markets we participate in. Innovation.
What I would assert to you is Pitney Bowes has been a deeply innovative company for almost one hundred years. That said, I would say our innovation agenda was somewhat misguided before 2012. And there's lots of different ways to dimensionalize it, but the simplest way to dimensionalize it for me is if you look at 2012, the amount of revenue that came from new products was 5%. Think about in the context of a company that's trying to move to markets to transform itself. If your innovation investments are not yielding the kind of results that you need.
It's impossible. It's impossible. 2018, 20% of our revenue came from new products. If you look at 2019, and Jason and Lila and Chris, Bob will talk about this, there will be more. Our innovation pipeline is as robust today as it has been, I would assert, in this company's history.
Culture. This is something that I mentioned at the outset that I think is critically important and well understood. If you look at the literature of successful transformations, they'll tell you that revenue growth is the most highly correlated factor with successful transformations. You know the second most highly correlated factor with successful transformations? It's employee engagement.
And it makes sense if you really kind of understand the dynamics of a business because without employee engagement, you don't have the team to carry you over the finish line. We've known this from the outset. In some ways, this is something that I inherited. I would tell you that Pitney Bowes has had an engaged employee base not just for the last six or seven years, but for the last six or seven decades. And it may be in the end of the day when this transformation is successful, one of the key reasons why.
We understood the importance of culture more broadly, however, and we have been since 2012 benchmarking ourselves against other high performance not other, about high performance companies that we aspire to be. We are not, let me be clear, where I want to be in terms of high performance yet, but we're benchmarking ourselves with the help of third parties against companies that we do think are high performing. If you look at the five metrics that we benchmark ourselves against: in two, we're now comparable of the metrics. And the other three that we think are important, we've closed the gap by half. And in fact, in one, we've closed by twothree.
If you think about culture in the context of creating and this is the way I think about culture. If you think about culture in the context of creating value, organizational value, it makes sense. Because in the end, if you can't create value organizationally at an enterprise level, then your ability to move the company and transform the company is limited. Four interesting statistics about clients, but I'll tell you it kind of misses the point. What has been instructive to me from the outset and more recently encouraging about Pitney Bowes is the kinds of clients we have.
If you look at our SMB business, the sheer volume of clients we have tells you a lot of what you want to know, hundreds of thousands of clients all around the world. And our software business, which candidly is now performing well but struggled for a bit, I think it's even more instructive. If you look at the number of Fortune 500 clients, some of the most sophisticated consumers of technology in the world, we have the preponderance of those clients using our software today. It's not because of our brand. It's not because of our great reputation within the software industry.
It's because we've got something that others aspire to, and that is software that works. It sounds trite, but I will tell you, having come from the technology industry, software that works and software that creates value is unique. More recently, I had the opportunity to attend our client conference in for commerce services, Global Ecommerce, a conference that Lila had a couple of weeks ago in California. And it was striking, and it was striking in the following sense. The clients that were at that event first of all, there was 200 clients.
And then if you look at the specific names of who those clients were, it was a who's who of within the retail industry and the marketplace industry. And that in and of itself was striking. But what was more striking is to think about our Global Ecommerce business three short years ago. Three short years ago was one client, one really important client, for sure, one really great relationship, for sure, but it one client and one use case. Today, we have over 700, I think 800 clients in that business.
Here's the broader point. You can kind of get lost in all the statistics. Our Global Ecommerce business, for sure, but also our software business, our SMB business, our Financial Services business have something that others aspire to, and that is we've got offerings and products that people want. You can get lost. You can get lost in the mechanics of transformations and GAAP measurements and non GAAP measurements.
I can make it very simple for you. If you want to transform the company, you need to have stuff that people want. Absent that, it doesn't matter. You can't save your way out of the problem. You can't move the company fast enough if you don't have offerings and capabilities that people want.
And what you're going hear about in the next presentations is we've got stuff that people want. Every one of our businesses improved their client satisfaction last year, every one. In our Presort business, we have best of class client satisfaction in the industry. And if you look at the underlying interim measures for client satisfaction, they're going to continue to go up. You don't find it on the income statement per se.
You don't find it in your GAAP to non GAAP reconciliation. I'm not sure I've ever gotten a question about it, but I can tell you that unless you've got clients, you don't have a business. I said a few minutes ago that Pitney Bowes enjoyed a reservoir of goodwill with their employees. And there's lots of different ways to measure it. Employee engagement is one.
There's others. But suffice it to say, as you look at the relationship between Pitney Bowes and our team, it is a tremendous asset. And I continue to be proud of the decision that we made last year to take the benefits from the tax bill in The United States and pour it back into the wages of employees, not just a onetime benefit, not just a one off, but a sustained investment in employee wages. It tells you everything you want to know about how we think about the importance of our team. Governance and Board.
We have had an independent chair for a long period of time. 40% of our directors are women. I made the decision in 2012 to change our long term compensation, which before 2012 was cash based to equity based. And I did it for a very simple reason, and that was I believe if you were going to have a long term sustainable corporation, you needed to align the interests of the executive and management team with shareholders. I would say more recently, we took the leading edge action of changing, and we did this with input from some of our investors, some of whom in this room, of how we thought about the tenure of the Board, and I'm looking at Steve, who is critical in how we thought about this, to a retirement practice that was driven by age to a tenure based philosophy of Board experience that valued certainly long term members, but also prescribed that you needed to have a continual level of refreshment over time and over a thoughtful kind of way to ensure that you had skills that were contemporary and current with where the business was safe because our business has changed so much and so fast.
Community, I won't belabor the point, but fairly clearly, Pitney Bowes has been a company that's been invested in the communities for a long period of time. Two weeks ago, Pitney Bowes was once again recognized by the United Way in Western Connecticut of our outstanding service. That's something that sustained this company for close to one hundred years. It will continue to sustain who we are and what we do. Financial stewardship.
Let me talk about this for a second. The first thing that I would say, the obvious, is that our TSR has lagged, and no one is happy on the management team. I know none of our current investors are happy with where the current shareholder return is. That said, if you believe what we believe, and that is we're taking the actions to create long term value, you think about this slightly differently. It doesn't necessarily make you any more happy with where the shareholder performance has been, but it gives you confidence that the company is doing the things it needs to do to create long term value.
Underneath the shareholder return, however, for I described to you a company that moved from secular decline five consecutive years to a company that's now growing and growing in an accelerated manner and did that whether reduced debt, reduced expense, reduced working capital and yet continued to make the investments in the brands, the systems, the people that we needed to do, you think about financial stewardships perhaps, perhaps in a slightly different context. More work to do here, but I would assert to you that as we contemplated what needed to be done, there was massive change that was required to move Pitney Bowes to a company that had a viable future. That massive change, to a degree, created two dynamics. The first was, particularly in 2016 and to a lesser extent, 2017, there were so many things moving around, it hurt our visibility, and it hurt our ability to provide clear guidance externally. The second thing I would say is given the massive change that we needed to make, it required huge investments.
Now we made those investments, and we sustained those investments in the context of taking $400,000,000 of expense out, but it wasn't something that we could do on the cheap. So those two dynamics of the change that we incurred, the stability that lack of stability it created along with investments, I would suggest, was many of the dynamics that hurt our shareholder return. I would say more recently, some of the hangover with the United States Postal Service has also been an overhang on the stock. And I would say well, you can answer it more in the Q and A. I would just say this about our relationship with the postal service.
Our relationship with the postal service has never been better. It's never been better. We have multiple different conversations around innovation, partnership, go to market that will be tremendously important going forward. We're not running away from the Postal Service. They're intrinsic to how we think about our future and really important to how we think about our plan going forward.
So let me conclude with three basic points. First of all, hopefully, we've made the case that we're taking the necessary long term actions in a holistic way, in a holistic way to create long term value. At the very least, you now know our theory of the craze of how it is we invest, how it is we think about long term value. It's not just financial stewardship. It's not just one particular it is how those eight factors together drive long term value.
Second is we're building off of core capabilities where we think we have a right to win. We're not shooting for the moon. The space between mailing and shipping and some of the adjacencies around financial services and software are logical adjacencies where we have the right to win. And finally, revenue growth, we pointed to in 2016, is perhaps the most important factor right now in terms of our future success. Again, you can't save your way out of the kind of problem that Pindi Bo's had.
The investment will continue. But again, go back to what we're going to lay out for the rest of today. Commerce Services profitable in 2021. SMB growing profit in '20 or Commerce Services growing or Global e commerce profitable in 2020 SMB growing profit in 2021. So it's revenue growth, but the earnings will follow.
Thank you. Now I'll bring up Jason to talk about SMB.
All right. Thanks, Matt. Sorry. Hey, good morning. So look, Mark did a really good job, I think, talking about our transformation, how we're leading for the long term at Pitney Bowes.
I want to take a second and just step back and talk just for one minute about our history because I think it's really important to anchor a couple of thoughts. When you hear about the businesses today, whether my business, Lila's, Bob's, Christopher's, none of those businesses are new thoughts. They all have long histories of success. When you think about the SMB business, it was born out of that first innovation in 1920, simplifying commerce for our clients, and we've been innovating ever since. Think about financial services.
We started offering financial services to our clients in the 60s, giving them access to capital to grow their businesses. In the 90s, we first put people, places and things together in software offerings. And we started innovating and shipping too in the early 90s as well. When you look at the last five years that Mark talked about, we've been building a different foundation for our business. We've been transforming so that we can continue to evolve as we go forward.
We introduced the data lake. We rolled out Commerce Cloud. We connected our clients digitally via the Your Account portfolio. We rolled out an entirely new enterprise business platform that really is the underpinnings, the foundation of all the evolutionary steps that we're going to take as we go forward. And the interesting piece about this is we're starting to yield those benefits.
Mark talked about a few of them. You think about 700 e commerce clients growing from just one, continuing to innovate around data, working with partners to go after clients in ways that we haven't in the past. Rolling out financial services capability. Christopher is going to talk about Wheeler Financial, which we launched this year. And we've transformed what once was a postage meter into an open platform, digitally connected, IoT enabled mailing and shipping solution.
I'd argue that our success in these spaces isn't a coincidence. We're really good at enabling commerce. We've been doing it for ninety nine years. And what you're going to hear about this morning in each of these businesses is that in many ways, we're just getting started. And nowhere is that more true than in the SMB business.
SMB is really reinventing itself in profound ways. I don't know what the corollary of a melting iceberg is that Mark talked about, but we're the opposite. We're leveraging our core assets, our core capabilities, what's made us successful over the last one hundred years, and we're building a new path forward for our business and importantly, a new sustainable path forward for the SMB business. Part of the way we're doing that is we're going after natural adjacencies. That's a word that you're going to hear a lot about today.
We're going after spaces where we have the expertise, in some cases, a head start and certainly the brand permission to compete and win. In the SMB space, in particular, you can see the success of this transformation all around us today. I'll talk about this in a few minutes, give you some examples. But this is not aspirational. You can see the change today.
And these things give us confidence in that third statement, which is really important, which is we have a path forward for our SMB business, a path to growth and EBIT flat or better year over year in 2021. I'm going to pause for a second because that is a very significant change in how we think about our SMB business. As I said, signs of this change are manifesting themselves all over in SMB. We've expanded the dialogues with our clients from mailing to sending, talking with them about packages, flats in addition to mail pieces. We've moved many of our offerings and a number of our routes to market from physical to digital.
And I would say that we've shifted gears over the last year or so in our ability to bring demonstrated value to markets and to clients. And I'll give you a couple of examples of this. If you think about our the launch of our SendPro C device, which was our flagship mailing and shipping solution we launched in fourth quarter twenty seventeen, and I'll talk about it in a few minutes, But kind of use fourth quarter twenty seventeen as one marker, end of this year as a second marker, so roughly a two year span. In that two year span, we'll have refreshed 75% of our product portfolio in SMB. And 75% of that new products, 75% of those new offerings are shipping enabled.
If you think about our ability to bring new value to clients, as Mark said, putting it in the hands of clients is what's differentiating, not just having it. In first quarter twenty eighteen and think about that, it was just one quarter after we announced the SendPro C, so we finally had some really interesting new value. In first quarter twenty eighteen, about 50% of our transactions in the SMB space brought new value to clients. So we gave them a new offering, a new capability. First quarter of twenty nineteen, 70% of our transactions are bringing new value to our clients.
That's a substantive change. Through the first four months of this year, we're on pace to deliver about 30,000 new placements in our business. And what's really interesting about that is if you look at the number of new clients that we brought into the business in the first quarter, 83% of them came in on our SendPro platform. That's really important. What that means is they came in not just as mailing clients, but they came in as mailing and shipping clients.
It's a substantive change for us. It's been hard work building this foundation. It's taken some time and some effort, but we're leveraging that foundation for success today. And as we look forward in the SMB business, there's four strategic priorities that we're focused on that we think are really going to help us accelerate this change over time. So let me kind of tick those through for you.
One, we're going to continue the hard work of simplifying and repositioning our portfolio for the future. Two, we're going to continue to invest and go after that logical natural adjacency in shipping. Three, we're really focused on making sure that we're rolling out this new technology, these new capabilities to all of our core markets and really accelerating the rate and pace of that innovation in our business. And four, we're going to capitalize on other adjacent opportunities farther afield but still near that sending space, where we have the opportunity, the brand permission to compete and win. So let me tick through each of these for a minute.
So first, simplifying and repositioning the portfolio. SendPro C launched in fourth quarter twenty seventeen. In many ways, it really epitomizes the transformation that we're undergoing in SMB. With SendPro Online, which is the web based version of our SendPro offerings, those two products really make up the core or the anchor of our portfolio as we go forward. The SendPro C is our core mailing and shipping solution.
It's built on an open platform, uses Google's Android operating system. It's IoT enabled, and it's got a simple touchscreen interface. It really exemplifies that promise that PB has of taking the complexity out of our clients' business. The SendPro C has got great client feedback. It's earned impressive industry accolades.
In particular, we've won some pretty impressive design awards that put us in some pretty elite company. Not many people a couple of years ago would have thought of PB in the same breath that they talked about Google, Tesla and Nest. But there we are. This platform enables us to do some really cool things. It enables us to see almost in real time how clients are utilizing our offering, to learn, to test, to adapt, to try new capabilities and then to deliver new functions and new offerings seamlessly via that IoT connected device.
The C is our core middle of the line product. So if you think about our product portfolio, the SendPro C is really targeted at, just in our existing client base, three and fifty thousand to 400,000 units. If you think about the first eighteen months since launch, we've shipped over 80,000 of those SendPro C devices. And in the first quarter, we shipped 18% more than we did the previous first quarter. Clients are really excited about SendPro C.
Our SendPro family, however, is much more than just the SendPro C. And we're going to continue to reposition the entire portfolio and ensure that we can bring new types of value to our clients across the product line. Let's talk about this simplifying concept, though, for a second because it's really important, and there's a couple nuances to it. The first is we're going to continue to move to fewer and more standard platforms. So a few years ago, if we had announced the SendPro C, you would have seen multiple models, three to five base models.
Each of those models would have had multiple configurations and virtually limitless numbers of features that you could attach to that. With the SendPro C today, we have two models. Those two models are feature rich. We've put everything in there. And we've done that for a couple of reasons: one, it's easier for our sales teams to understand the value and talk to clients about it two, it's a lot easier for clients to understand the value that they get and three, it positions us really well against competition.
We're going to continue to shift to open platform stacks. It's easy to upkeep the technology, to work with those technologies when you're on open platforms. We're going to simplify our pricing structures. We're going to continue to enable cheaper and more effective routes to market. We're retooling our client experience.
When you take all those things and put them together, the simplified product portfolio, simplified pricing, process and tools, It lets us take complexity out of our business, which is critical. It lets us yield operational efficiencies by taking upstream and downstream cost out of our business as well. Our second priority is going into that natural logical adjacency of shipping. The reality is virtually every one of our clients ships. There is eligible shipping volume, sending needs all around them.
And we can help them save money and reduce complexity just like we did with mailing. We have a ready made opportunity here in SMB, whether it's with SendPro C, SendPro Online or a new version of SendPro that we launched last year in January, SendPro Enterprise, which really targets our highest end clients in the client base. We're taking advantage of this shipping opportunity in multiple ways. And there's an exciting new member of our SenPro family, the SenPro Tablet, which we just announced. It's a great example of taking a familiar and exciting technology and using it to help our clients make their workflows more effective and more efficient.
Let's take a look.
You need a competitive edge. You rely on technology to gain an advantage, especially if it's designed to improve your business. And that's precisely what we've created. Introducing the SenPro tablet. It's the simpler, smarter way to ship.
We've taken technology that you already know how to use and customized it specifically for your unique shipping needs. Featuring a large lightweight tablet from one of the global leaders in technology, the SenPro tablet combines innovative mobile technology with the unparalleled shipping experience of Pitney Bowes to deliver the industry's most versatile solution. SenPro tablet simplifies shipping with USPS, FedEx and UPS, helping eliminate the need to leave the office to drop off packages, use its camera to quickly capture and populate address fields, and make repeat shipping easier with the voice activated presets. But it's far more than a mobile device. SendPro tablet is designed to let multiple users ship from virtually anywhere in their office with a 70 pound scale, a wireless enabled shipping label printer, and a Bluetooth keyboard and charging dock.
When it comes to saving money, SendPro has you covered. The shipping rate selector lets you easily toggle between all three carriers shipping options to choose the best rate and delivery time available. Plus, the preloaded apps make every aspect of multi carrier shipping easier for anyone in your
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So we're just starting to grow roll out our the business. SenPro tablet, but the initial client feedback has been outstanding. They love the voice commands. They love the portability. Most of all, they love the camera, being able to capture addresses and import them right into the app and then print a label in seconds from wherever you are, it is a common and compelling solution to a clear and obvious client pain point.
This ability to participate from an SMB perspective in the shipping space significantly changes our outlook. We've successfully created a number of new offerings and capabilities, by the way, some of them leveraging the technologies and capabilities from Lila's business, from our commerce services partners. We've been able to create a business that is already growing in the SMB space. In 2018, SMB clients printed 50% more labels than they did the prior year. We've just got to get this capability into more of our clients' hands and make sure that they're consuming the full value of that capability more effectively.
It's also about bringing new clients into the SMB space as shippers. I mentioned earlier that 83% stat, 83% of our new client acquisitions in the first quarter came in through the SendPro platform. Part of that's because we've changed our targeting slightly. We've started to target not just mailers as people we want to bring into portfolio, but shippers as well. And what we found is when we do that, they actually spend more money with us on shipping.
In fact, in the second half of last year, people who we had targeted with the shipping profile spent 5x as much with us on shipping as they did on mailing. Shippers love SendPro. Clients also love that multi carrier feature that you saw, the ability to compare service and rates across different carriers. It is differentiating, and it's easy to sit with a client and have a quick conversation with them on how they can save money and simplify their business. Online continues to evolve.
We continue to learn about how our clients use it. We continue to take friction points out of the process for them. Today, we have about 30,000 clients on our SendPro multi carrier subscription offering and another 100,000 on the USPS only version. I talked about SendPro Enterprise. So SendPro Enterprise really targets our largest clients, clients really with multi location needs.
So you have a headquarters, remote offices and even home office shippers. Enterprise allows us to have a solution for that entire stack. We can really sweep the floor with the shipping and mailing capabilities now that we have with SendPro Enterprise. It's been hugely successful since we launched it in first quarter of twenty eighteen. And in fact, we had 7x the number of orders in the first year than we planned in our business case.
Clients like SendPro. Now admittedly, we still have work to do, getting the shipping capability into more and more of our SMB clients' hands. But there's a good news story here. We have the clients. Mark talked about how important that cost of acquisition is.
We have the clients today. Our clients ship, and we now have offerings and capabilities that are compelling for them. It's actually a really good place to be. We've also been focused on that third priority, which is accelerating the speed of innovation globally. And there's two thoughts to this, which I want to go through.
The first is around enhancing our portfolio, making sure that we have modern and refreshed shipping and mailing capability in each of our core markets this year. That means we're going to roll out 20 significant product launches globally in 2019. That's a rate and pace of development with our international markets that we haven't seen in a long time. The second goal is to really focus on how do we improve the rate and pace of our experimentation. How do we leverage those capabilities around the globe?
How do we leverage these different communities who have good and compelling thoughts that can bring us new offerings and new capabilities? Perfect example is something that we're doing in Australia with a company called Sendle. Sendle has some really compelling, unique capabilities in the Australian market. They have unique relationships with some carriers there. So the team got together with Sendle, paired it with SendPro.
In the span of six months, it went from idea to an offering launched in the market. And within the next six months, we grew our client base in Australia by 10%. That's pretty spectacular. And now we can go back to those new clients and add in other SMB offerings and capabilities. It's experiments like that that are important to us going forward.
We've got to continue to gather the learnings, figure out how we replicate those successes and roll them out to other markets. It also is a sign of the different rate and pace with which we can innovate now because so much of our innovation is on digital and SaaS capabilities, not just tied exclusively to hardware. One of the most exciting longer term opportunities is this fourth one, and it's the ability to go into other natural adjacencies beyond just shipping and mailing, adjacencies that can be leveraged by using our existing infrastructure in this open platform capability. A great example is using data and analytics. So we've been working with clients for a number of years.
We have good information on them. We have their credit histories. We have their product We have their usage profiles. We have IoT connected devices that gives us real time data and information on what they're doing today. We took all of that information, brought together our data and analytics experts from across Pitney Bowes, and we sat with five of our largest clients, and we talked to them about their pain points, about their inability to get usable and actionable information across their mailing and shipping environments.
And as a result of that, we created a new offering, which we've just launched called SendPro Insights.
You can access SendPro Insights from your Internet browser or download and install the SendPro Insights app on your mobile device. Centrally monitor all products across locations, manage divisions, locations, and users within your enterprise. Select a location within a desired time frame to get a complete snapshot for the location and gain valuable insights for that location, including postage and a monthly spend insights. Analyze data by location, carrier, mail class of accounts. Spend trends, hot spots, and comparatives.
Get personalized recommendations and tips to increase productivity and save costs. Pitney Bowes SendPro Insights, it's all about your business.
Data and analytics is a clear opportunity for us, but there's other opportunities for us to leverage our core assets in ways that are new and create new revenue opportunities for us as we go forward. So let me take through a couple of those. Probably the most obvious example is the one that you're going to hear about next from Christopher, and that's around financial services. Wheeler Financial is a way for us to drive new revenue streams for our business. And I won't steal his thunder, but I will say our teams in SMB, our sales teams, our client teams are really well positioned to bring this offering to market.
One of the most interesting opportunities long term that we've been talking about for a little while now, and you would have heard it from me last year at Investor Day, is really this opportunity around partners and apps, this notion of a partner and app ecosystem that can be delivered to our clients via our existing platforms. We had great success last year rolling out 10 apps to our 80,000 SendPro C clients. Some of these apps were developed via global hackathons. So you'll remember we talked about this last time. We went out and engaged with developers around the world, both inside PB, but importantly, outside of PB.
We educated them on our clients. We educated them on the mailing and shipping environments. We educated on some of the key pain points that our clients face every day. And we asked them to come back with simple and compelling solutions that we could deliver to our base of clients. We also went out and partnered with selected third parties who thought that they had value that they could bring that would be meaningful for our clients as well.
This is one of the most interesting opportunities for us as we go forward. It is the power of an open platform and a large client base. I'm really interested to see how this transpires for us. Who would have thought about Apple Pay or Alexa? That's the power of an open platform and a large client base.
One of the most interesting early examples of this we have is with a company called Duliv. So for those of you who don't know Duliv, Duliv is a same day delivery servicing in places around The U. S. And North America, growing really fast. Diliv does same day delivery service much like Uber does.
They crowdsource the delivery capability by and large. We work with Diliv through open APIs and created an app that sits right there on that SimPro C device. Clients can now print labels, schedule pickups right there, just like they do with mailing and shipping. It gives them an entirely new set of capability to use on that one device. The next phase, by the way, we will enable to live as a carrier.
So just like you saw on the multicarrier features, you had USPS, UPS, FedEx, and now you have another set of options. These third party apps and partner opportunities make us more sticky with clients. They make us more relevant. It helps with retention. And we can monetize these opportunities as we go forward.
This apps and partner play, this notion of a partner platform for us is going to be really important as we move forward. The last one I'll mention here, just by way of a different type of thought, is in leveraging our services capability. We have a large services organization around the world. There is actually a team within that services organization who effectively incubates and prototypes new opportunities for us, some of which become one off and we let them be, but some of which we pull into the broader portfolio. For example, they were very involved in SendPro Insights.
In that third module you saw, SendPro Advisor, so having the ability to go in and help clients understand and learn what to do with the insights that we're bringing forward. It's a small group. They found some gems. And last year, they grew their business 70%. These plays, just like shipping, significantly change our addressable opportunity, which is important for us because while we play in a big market, the mailing market, it's a market that seems to climb.
It has headwinds. The mailing market is going to be critical for us as we go forward. We are not backing away from it. But as we move into shipping over time, our market increases significantly. And when you recompile that opportunity, over time, we move from markets that are in decline to markets that are growing.
And that doesn't include, by the way, the full value of those other types of opportunities off to the side there: Wheeler, partners and app ecosystems. Now look, it's going to take time. We're still heavily weighted in one of those columns, but it's a very important shift in our addressable market for the SMB business. All right. Let me summarize our strategy.
I'm going to do it in two parts. Our focus is on creating and delivering new value to our existing client base. That new value enhances relationships, makes us more sticky, helps with retention and ultimately locks in those profit and cash streams. That new value, think shipping, financial apps, partners, app ecosystem, that new value also allows us to create net new revenue streams with our clients and with new clients. So said differently, our strategy is to deliver new value to our existing client base to lock in revenue, profit and cash while creating new revenue opportunities in our existing client base and beyond.
So let me end where we started. We are redefining our opportunity in the SMB space, going after these natural adjacencies where we have the brand permission, the expertise and the offerings to be successful. Signs of this change are happening all around us. It's starting to pay off. And I would point out, it's paying off for us while some of our competition is still contemplating investing in transformation and investing in growth.
It's happening for us today. What's different and compelling about the SMB business is the way all these piece parts are coming together: refreshed product portfolio, shipping, SaaS and digital solutions, Wheeler Financial, operational efficiencies. All of those things give us confidence in that third statement, that SMB has a path to growth, and we will be flat or better on EBIT in 2021. It's really exciting time for SMB, and I look forward to talking to you about where we are and where we've come next year. So with that, let me bring up my friend Christopher Johnson, who leads our Global Financial Services business.
Chris is an incredible partner for us in the SMB space and is surprisingly innovative in the things he's doing in this space. And you'll hear about that now.
All right. Thank you. Thank you, Jason. Good morning and it's a pleasure to be here with you all today. As Jason said, my name is Christopher Johnson and I lead the Financial Services Division here at Pitney Bowes.
So today, I'm going to do is I'm going walk you through a progress update on the business as well as share with you some of the new and exciting innovation that is pivoting us towards growth. But let me first start, however, a few ideas around 2018, which I think are important for you guys to take away. It was truly a pivotal moment for the Financial Services business in terms of laying some of the critical foundations for growth as well as positioning us for success over the long term. I think it was also equally important with respect to evidencing the strategic relevance that Pitney that Financial Services plays within Pitney Bowes. With respect to showcasing how the alignment of the businesses that we have across the enterprise are truly differentiated, better and stronger together.
So let's start with a quick reminder of how financial services fits in to the overall Pitney Bowes. We're an important part of the company, an enabler as well as an essential component to the fabric of the Pitney Bowes franchise. In the SMB business segment, we provide captive equipment financing, working capital lending and partner payments that fuel our commerce cloud as well as enabling the U. S. Postal Service.
In commerce services, amongst other things that we do, we provide critical working capital capabilities and deposit capabilities for our pre sourced services platform. We also provide shipping and logistics finance, payment processing as well as fraud prevention. And organically within the financial services business, we are building on decades of economies of scale and experience to capitalize on adjacent growth opportunities that are essential to our customers. Altogether, we enable over 80% of the products and services that we sell as a company. We are an important part of the growth equation across this business and are an important driver of the value, differentiation and margin generation here at Pitney Bowes.
I think we have an impressive resume of how we create value across the company and I think it's fair to say that this is certainly different than your father's Pitney Bowes. So a year ago, I shared with you a new vision for GFS centered on expanding shareholder value. I spoke about our commitment to position GFS towards growth, principally driven by three objectives, starting with improving our performance in our core captive financing business. Over the last year, we've made tremendous strides in stabilizing our lease net finance receivables or simply put, the level of assets in our portfolio. Five years ago, we had close to $1,600,000,000 of lease assets.
And through 2017, our portfolio had been contracting at a rate of about 11% to 12%. Now when you look at what we've been able to achieve in 2018, the results do speak for themselves. The operational focus and rigor that we have implemented in our core captive finance business has cut the rate of decline by nearly 75 and is producing real economic benefits for our company. Our performance trend has also continued into 2019 and there's no better evidence than the continued improvement in the decline profile of our finance income. In the first quarter, finance income fell 2% year on year on a constant currency basis, which is the best result in a very long time.
So what I would ask you to do is if you take nothing else from my presentation today, please remember that this is an important proof point of how Pitney Bowes is creating a better earnings and free cash flow profile for our investors. Now although significantly improved for all the finance majors, I do know that negative 2% is still a decline. And to that end, we have worked very hard over the last twelve to eighteen months to launch a new set of capabilities to pivot GFS into growing and expanding markets with the ultimate goal of getting back to growth. As hopefully many of you have seen, we successfully launched in the 2019 our new third party equipment finance business. And it's my pleasure to introduce to you Wheeler Financial from Pitney Bowes.
Wheeler Financial is an equipment finance business that focuses on providing small and lower middle market companies on Main Street with access to capital necessary to fuel their growth. We will focus principally on our existing customers where we have a distinctive advantage choosing purposefully to create more value and deeper client differentiation in the following six segments: Business Services, Construction, Healthcare, Manufacturing and Industrial, Technology and Wholesale and Retail Trade. So why are we doing this? It comes down to three simple reasons. First, we know that this is a large and also growing market.
Second, we know that this market is massively underserved and our customers need us now more than ever. And third, we have both the rich history and the capability to serve, compete and win in the small business financing market. Small businesses are not only growing, but they are also heavily investing. Arguably, this is the best business environment for small businesses in the last fifty years. As they grow, small business owners are investing in their companies to support that growth and CapEx has expanded at an unprecedented rate over the last ten years.
So here's the point. We're positioning financial services right smack in the middle of a market that is growing at a rate of close to 10% per year. So let's take a closer look at this market together. In spite of the fact that small businesses are doing so well, there is less capital available to them. Loans to large corporates have consistently risen for the last eight years in a row.
In fact, corporate debt in The U. S. Is at the highest levels it's been since we've been keeping track of records here in The U. S. However, on the other hand, loans to non farm small businesses have been steadily declining year after year for the past decade.
And when we look at why, well, that reason is not that hard to find. Banks that focus on small businesses have been in steadily decline. The number of institutions in The United States that have less than $100,000,000 of assets under management has precipitously fallen close to 80% in the last twenty years. In addition, large additional players that were essential to this market such as GE Capital, are no longer around. So imagine that.
This is the largest sector of our economy, and it's the workhorse of our economy, but it's a segment that has declining financial support. There simply aren't enough sources of capital out there for small businesses in the market, and that's where we come in. Wheeler Financial is uniquely positioned to capitalize on the opportunity in this space. First, we have customer relationships. Pitney Bowes has a very large network of small business clients and with over 750,000 active customers with the average relationship of eight to ten years.
We have a large advantage over other competitors with respect to the cost of customer acquisition, which as you know and Mark spoke of represents one of the biggest challenges for market participants. Second, we have deposits. We have access to a large pool of deposit capital at a very competitive cost of funds. This provides us with another significant advantage over other market participants that gives us the flexibility to be both competitive, while at the same time earn higher margins. Third, our banking platform allows us to sustain this competitive advantage.
We have the ability to raise incremental deposits and access the debt capital markets in support of the Wheeler financial balance sheet. Fourth and perhaps most importantly are the proprietary data insights, the analytics and the experience that we have with our customer base. This affords us truly unique advantages with respect to credit trends, the payment histories, the cash flows and ultimately the portfolio performance. So now if I were sitting in your seat, I would want to know how are we going to maintain a safe, secure and sustainable business. So look, I could walk you through all of the well thought out and the valuable concepts that we are doing in the business and we have employed in the business, but I'm going to take a slightly different approach this morning.
While these are all certainly things that are the right thing to do, for those of you who don't yet know me well, let me assure you that I've been in this business for a very long time and I understand the inherent risk in this business model very well. Suffice it to say that operating a safe and secure business is paramount to everything that we do. This includes ensuring that we have the right principles, having a sharp focus on the assets that we will finance as well as a disciplined approach to credit underwriting. Maintaining a safe business also means ensuring operational excellence and we're committed to doing things right. Although we are looking at different equipment types to finance, the core nucleus of our underlying processes that we've been doing for the last thirty years don't change because it's a third party manufactured piece of equipment.
Our obligations to originate and structure deals appropriately, to underwrite customer credits, to manage the assets, to service the portfolio, don't change because third party manufactured piece of equipment. Also, think it's important here to articulate that we are financing essential use equipment. And it's important to render it explicitly clear that the majority of the portfolio is intended to be loans versus leases that don't carry a residual value. So we've spent the last twelve or eighteen months building a world class team made up of industry veterans, fueled by world class technology that allows us to be both flexible and agile. The net net here is that we have the depth and the breadth, and we are specifically designed to succeed in the small business financing market.
Next and very important to long term success is our approach to funding. Our approach here is also well crafted and designed to create an advantage over other market participants. What you may not know is that we operate the Pitney Bowes Bank Incorporated, member FDIC. Wheeler Financial as well as our working capital loan business, including shipping and logistics finance is a part of our bank and will be funded out of our bank. We have access to excess deposits at a very low cost of funds that we will deploy to fund our business expansion in loans and leases.
This is an opportunity for the company to generate greater returns than we have traditionally yielded in treasury securities. Looking forward, we will raise incremental deposits to fund the business. And also as equipment finance is a very attractive investor asset class because of its relatively low risk profile, we will also use the debt capital markets including syndication and securitization to fund this business over the long term. Lastly, with respect to Wheeler Financial, here's what we expect to see financially in 2019. As we outlined in our first quarter earnings call, we expect volume origination in the range of 50,000,000 to $70,000,000 This will scale higher over time for sure, but we will take a prudent approach in the initial days.
Net interest margins will be better than the industry average as we have an advantage cost of capital and we also expect a better credit performance given our proprietary knowledge of our customer base. Given these dynamics, return on assets will be highly accretive to the company overall. Lastly and very importantly, we will maintain a strong bank balance sheet and remain committed to a well capitalized FDIC designation. In
sum, this
is a great opportunity and a business profile for investors that will deliver strong financial results over time. Our strategy here is actually quite simple and it makes both perfect business and economic sense. We're investing in our customers. We're creating more competitive differentiation, improving our value prop and retention. At the same time, we're driving a higher margin profile for the company overall.
So ladies and gentlemen, that's Wheeler Financial. Now let me briefly transition your focus over to shipping, the second area of growth that we're focused on driving for the company. First, I think it's important to take a step back and to look at the progress that we've made over the course of the last year. We've had nine consecutive quarters of shipping lending growth proving that we can indeed cross sell financing into this market segment. We've had over $165,000,000 of shipping credit extended to facilitate shipping logistics volume and similar to what we see elsewhere in the business, over 85% of the label volume in this business is enabled by GFS today.
So although the margin profiles of lending in the shipping market is different than that of the mail market, just given the general larger volumes that shippers send, What is most relevant about these stats is that GFS is a key part of driving the adoption and the acceleration of our shipping strategy across both SMB as well as Commerce Services. The impact that shipping is having on the financial services business is clear when you look at the postage volume financed by GFS today. Mailing lending volumes have declined in line with the market over the course of the last four years. But with the introduction of shipping finance, the aggregate portfolio volume has started to stabilize in 2018 year over year, cutting that rate of decline by more than half. So make no mistake about it, financing is a strategic differentiator for Pitney Bowes, but it's also an important enabler for our customers.
So let me try to wrap up and pull all of this together for you. Here's what I would hope that you would take back home with you today about Pitney Bowes Financial Services. First, the intensity of focus and the operational execution in our core captive finance business could not be any stronger. We have reduced the rate of decline in our core legacy portfolio and our current performance is beating the rate of market contraction. That equates to higher revenues, more earnings per share and a higher free cash flow.
Second, we have a unique set of attributes within financial services and we're capitalizing on these advantages by entering into high growth enterprise opportunities including Wheeler Financial as well as shipping and logistics finance. Third, financing is driving an important competitive differentiation that is both relevant to our customers and accretive to Pitney Bowes and its shareholders. Lastly, we've done the work to ensure a competitive, but a safe and secure business that will deliver an important annuity income stream that will help to return our external SMB segment back to growth. Our pivot here is well underway and we're building a profitable growth business here in Financial Services. So thank you and let me introduce my good friend and colleague, Bob Gudati, EVP and President of Software and Data Solutions.
Thanks, Christopher. Good morning. Let me add my welcome. Now one of the things that I want to just point out before I get started here is we actually have changed name here. We're now the Software and Data Solutions organization.
It's a little bit of a subtle change because we've always sold data at Binnie Bowes. The difference now is we're putting a lot more focus on it because we've come to realize the great assets that we have and we've putting some dollars into it. I'll take you through some of the things that we've done over the past couple of years and the impact it's had in the market and the strategy we have going forward longer term. Now this is a chart that I showed actually, I guess, was eighteen months ago or six fifteen months ago at our last session. We are staying on course in the software business.
We're going to continue to leverage the relationship as far as all the information we get from Pitney Bowes. We do a lot of delivery of packages now, as you've heard. And that information provides us a data quality that nobody else has in the industry. More importantly, we're focusing our portfolio. Mark made a comment and showed the charts about going from 5% to 20% of new technology over the past few years.
Software is now across the line. We're getting over 50% of our revenue is on new products that we introduced just a few years ago. The impact that has is that the headwinds that we are suffering from in previous years are now behind us. And now we have growth opportunity. And this is why we think that by focusing in on those core major pieces that we've identified and we've moved our development dollars into and we've trained our sales reps and our partners on is going to give us that acceleration that we're looking for over the next couple of years.
And obviously, we continue to work with our partners. That's a story that we've been on now for over three years. It's really starting to come together. Then I'll take you through some of the activities that we have with our partners to demonstrate the growth that we've had. Now 2018 was a very good year for us.
As I said, we crossed the chasm between our growth with our growth products, our strategic products and the foundational products we've had for many years. And you saw that with our second year of revenue growth. You saw an increase in EBIT margins that we've been able to deliver. But we've also been able to accomplish some things in the marketplace we didn't see before. We introduced the Software and Data Marketplace, which is one of the key components of our ability now to go out into the data space and be recognized as a leader in this area.
And you start taking a look at some of the results that we have up here, I think you'd agree that it was a good year in 2018. And we're going to continue to accelerate that in 2019, 2020 and 2020. We have some aggressive plans, but we feel very confident that we're now on the right path. Now the marketplace also is a good one. Last year, when I showed this chart, it was a 21,000,000,000 to $23,000,000,000 marketplace.
Now it's up to 23,000,000,000 to $25,000,000,000 And we're going after about $6,000,000,000 of that. That's determined by the industries that we're focusing in on and the geographies that we're competing in. But if you take a look at the underpinnings of that marketplace, the 15% to 20 EBIT margins, the growth positions, we're in good position also now to take advantage of those. And of course, we're now putting that data business out there as $1,000,000,000 business because we really think that we're now much more better positioned to go after that space. These are the major components of what we do.
Now customer information is something that there's a lot of competitors out there in the marketplace. And we're not looking to take those people on head on. The beauty of what we have in our space is it's complementary to what customers are looking for, meaning they've made investments already in customer information. But what they don't have is that around location. If you think about what we're doing now, people are starting to recognize location is a critical component of everything that they do.
And they need to make sure that when they talk about their customers and how they relate to each other, that location is a key component of it. When you combine our location intelligence and our customer information system, it really provides an advantage that nobody else can offer in the marketplace, and our customers are seeing that. In fact, what we've done is we've consolidated our architecture under the Spectrum platform to be able to support both of those models. So customers are looking for their customer information management or they're looking for location, it's all based on the same platform. And as I said, it's complementary to a lot of the technology they have today.
Now we put customer engagement out there also. This is absolutely continues to be a critical part of our strategy because it's how we communicate with our customers. This is an area for the past twenty, twenty five years, Bidney Bowes has been an integral part of our ability to communicate with customers. A lot of that was in the physical world, our ability to do mailing, to be able to put together the information that you receive in your mailbox. What we've been working on for the last couple of years is a digital strategy through video, through chatbot and all the other digital technology that our customers are looking for in different ways of communicating with their clients.
And this is the omnichannel approach. We have now been able to bring together an entire portfolio of products that complements the products that we already have in the marketplace to go out to our existing accounts and offer them new technology to expand the way they communicate with their customers. And finally, you have the stand data piece. Now the stand alone data piece is something that's very unique to us. It offers us the coverage and the breadth of the types of data that our customers are looking for, and I'll go through that in more detail.
So what is it about data that makes us unique? First of all, we cover a large amount of information that comes in. Now large a lot of information on large areas, that's interesting, but it's not that important. What's really interesting now is how we're able to now consolidate that information and start drilling down. If you're interested now knowing about your customer, it isn't just about that customer, but it's also who are the other customers that you have potential to go sell to.
It's the relationship with other people. It's the communities that they're in. It's the associations that they're part of. It's the school districts. It's the properties that they own.
It's the businesses that they commute to. All this information now is being consolidated and put into systems that allow our customers now to do a much better evaluation about the marketplaces that they're in and the marketplace that they want to get into. There's a competitiveness here that is really outstanding from our standpoint because we're offering that unique capability of being able to take data and curate it and do the work that our customers are doing themselves. What do I mean by that? Customers today and it doesn't matter if you're in the financial industry, the insurance industry, retail, public sector.
What you're doing now is you're gathering data from all different sources. You're taking your own data and you're pulling it together and you're doing analytics on it. Well, here's the challenge. You're doing a lot of that work yourself, and it isn't always accurate. What we have now is the ability to take that data that they're getting, and we are curating that data for them.
And we're providing it back to them in a much higher quality and in a format that they're looking for. This is cutting their expenses and giving them better quality data than they ever had before because we're combining that with our software tools that provide the quality and the location. This is critical to their success because what's happening now is they're able to make decisions faster and better response time. Our ability now to ingest data from over 60 different sources using our tools, ingesting customer data, their data and along with our data is giving them that difference in margin that they're looking for. We've had some major financial institutions, telco companies, financial institutions, insurance companies rather, who are now standardizing on our technology, leveraging our data to run their businesses because we're giving them that flexibility to ingest their own data.
So what are we doing? We're pulling together addressing and enrichment so that now as you take a look at this and you say, okay, here's the community. What's really going on in that community? Being able to go down from a location intelligence standpoint and really pinpointing what you want to be able to do in that location. As an example, where should I put my stores?
Where do I put my distribution centers? Where do I put my cell towers for five gs networks? Where do I put ATMs? How do I get myself associated with advertising? This is the information that we're able to pull together for our clients that they don't have any other sources.
They have other sources they get it from, but they've got to do it themselves. The other piece of this now is about social. Now this is one where we've been working with companies who provide and have a lot of information about social, information about people, your LinkedIn, your Facebook, your e mail addresses. And they understand now where that is located. They're now pulling that data into our systems.
So allowing people now that they want to communicate, they have a lot more information, not just physically, but socially around that individuals. Now we have to be careful here. This is one of those things where you get a little creepy. There's so much you can you may want to know. But at the same time, a lot of these are based upon people who have applications who are now leveraging that application and saying, I'm willing for you to have you use that information in order for me to understand where you are and communicate with you appropriately.
Last time when we were here, we put an app out there that said that if you crossed over and entered the Weston Hotel, if you had the application, it would notify you and you're getting a message from Pitney Bowes. That's the accuracy of the type of information we have available. Where you cross a boundary with your cell phone, we know that the accuracy of which we have this, that you're now on a property or close to a property. Then we can send you an offer, we can send you information that may spark you to take action. It's pretty powerful stuff.
Now one of the other things that we had we identified a couple of years ago with our data, it wasn't very consumable. By that, I mean, we were had data, but if you wanted to buy the data, you want to test the data, you want to use the data, you want to get updates, we had literally way too many systems that were supporting that activity. One of the first sales calls I made here was with a large financial institution in New York City, and they said, we use eighty four year data sets. And if I knew you had other data sets, I'd probably use them, but the thing you have to fix is how you send your updates out. We literally shifted a couple of million dollars of development dollars out of one area that wasn't growing into this space.
And last year, we launched the software data marketplace. It really is a data marketplace right now that allows us for end customers to come in and sample the data sets that we have. I encourage all of you, please go online, take a look at this. Information about school districts, real estate, all the type of information that as a business you want to start downloading and start playing with, we now have that capability to show it to you. The results of that have been we've identified over $20,000,000 in business opportunities.
We've closed over 5,000,000 and we now have thousands of customers who are entering our site and getting better awareness over what we can do at Binnie Bows. And they're asking for data. Now as part of that strategy, we're also letting them know about the software we have. So it really has been able to allow us to expand our brand presence, understanding what the customers are looking for because we are actually keeping track of every single customer that comes in. We understand the downloads that they're looking for, and we start making recommendations back to them.
I understand you downloaded this. Would you be interested in this? And we're actually now starting to be able to do transactions automatically, do it right through the system, through credit cards and other transactions. We feel this is a really great opportunity for us for a couple of reasons. One, drives revenue, drives awareness.
And as I said, we started expanding that population. Our partners are also very interested in this space. If you're a partner, one of the things that you've been doing for years is selling software. What you haven't been doing is taking data and including it as part of your offering. So the partners are now starting to customize and put together their offerings on our marketplace and allowing the customers to download and get the data directly from them.
Now our partner channel, as we have stated before, is really critical to the future growth of software and data because the reality is I have a great direct sales force. They are outstanding. They know their clients, they know their industries, but we're limited to the spaces that we're currently in. What our partners are enabling us to do is enter new markets. The other piece that you'll find is that the technology that we're talking about is complementary to a lot of other technology.
We're in the location business. We're in the addressing. We're in data quality. That in itself is not a solution by itself. It's when you combine it with other things that you get real value.
Now large technology companies are used to doing that. They're used to taking lots of different technology, combining it together. Partners do the same thing. And what they're doing now is they're looking at our technology and saying we can take your location information, your SIM data, your CES product, your data itself, we are combining that with other offerings that we have and selling those into the marketplace. And they're going after industries that we weren't part of before.
In fact, what we're doing now is working with them in these swim lanes. We have over 14 different swim lanes. By that, we mean these are partners that we've identified that we're working with for them to develop their solutions in marketplaces that are unique to them. Example is higher education. We are not in the higher education market.
That's not where I've deployed the direct sales team. I've got two partners out there that spend a lot of their time with higher education. Think about location in higher ed. If you're recruiting students, you want to understand the school district, you understand the tax base, you understand previous scores, property values because you want to appeal your school to those students. You want to know what school districts they are, you want to start collecting data on who they've got, where they've gone to colleges before and start accumulating that data and customizing your message directly to those students.
Our partners do that for us. We don't have to do that ourselves because we don't have that knowledge, we don't have that institutional capability, and we haven't been doing it for years. They have. Just an example of how by leveraging the partner community, we're getting into markets and getting opportunities we did not have before. This gets back to the Lyft idea.
You'll hear us talk about lift. When you're building a channel, obviously, the first thing you have to do is you have to identify these folks. You have to bring them on board. You have to educate them on your product, which is something we've been doing for years. And then you have to bring them into your opportunities.
You work side by side with them in the beginning because they want to get a better understanding of how your technology works. They want to understand and get comfortable with that relationship. What then happens is they start going out on their own, and that's what we refer to as Lyft. That's when they start bringing us into deals or they start executing deals on their own. That's a tremendous advantage to us because now the sales organization has focused on their territory.
They're assisting the partners in what they're working on. And also, we end up getting some revenue we hadn't even counted on before. That is what the payoff is in 2019 and the work that we've doing for the last three years. And that's why we think that we have a really good program and one that's going be accelerating. The other piece on the partner program is we are expanding it out to more ISVs, people who are developing their own software in the marketplace and using our technology underneath the covers.
We're seeing a great uplift right now in awareness of people coming to us and asking how do we get your technology into our solutions, And that's all positive. Some of the results of what we've been doing. We measure this thing every month. We measure how much pipeline they've created, how much pipeline they're involved in, transaction sales. One of the encouraging numbers that you'll hear us talk about is small deal volume that's been going up now six quarters in a row.
A lot of that has to do with the fact that we have partners out there who are generating these transactions. They're out there building up the base of customers that we're working with. We don't go into software and sell million dollar deals. We'd like you to, but it doesn't quite work that way. You have to build that installed base up.
So we've been doing a lot of work with them and tracking very good revenue progress. And we're being recognized in the industry also. These are programs now that get monitored and they get reported on. The reason why this is important because if you're a partner and we approach you and we say, want you to become part of our program, they will look to say, how good is your program? We point to these things and we get instant recognition.
Partners are always concerned about how they're being treated by their software partners. And we have a reputation on the marketplace, got some of the best programs in the world. So what are the key takeaways for this part? Two year consecutive growth. More importantly, we've now crossed that line that says we're getting more of our revenue from new technology versus the older technology that we've been selling into the marketplace for years.
This was a strategic decision to fund certain development effort, decelerate others and actually increasing the profit on the picture. That vertical focus is critical to us. In the past, we were too broad. We were trying to sell into too many markets, too many different solutions, and it was not being effective. We are now going into certain industries and telling the story about what we have the capability of doing.
One of the charts we used to show is that we had 24 of the top 25 insurance industries agencies, carriers in The U. S. We're now 25 out of 25. That's the focus we have. And then finally, sustaining the momentum and the data and the channel is key.
These are the product stuff that we have to go work on. We have got to continue making sure that our data is high quality and what our clients are looking for. There's tremendous upside here. As we start having conversations with our partners around data and our customers about data, it's becoming more and more relevant. This is what they're after because it complements our software sales.
And then finally, making sure that partner program continues to grow, continues to provide us the lift and the leads and the closes that we're looking for. This has got a major component of our overall strategy as we continue to grow. So that's the software positioning. You'll see that we've done some new things, but we're on the path right now to maintain that position that we're currently in and just go faster. It's all about speed right now.
So with that, I'd like to bring up our revenue queen, Lila Schneider. Is that a new title we're going to give you now?
All right. We can always count on Bob for a colorful introduction. When Jason said something nice about Christopher, Bob leaned over and said, don't expect that from me. So we're in the home stretch toward the break. So I will try to get you there efficiently.
I'm excited to talk to you about Commerce Services. I feel like we were just here a little over a year ago talking about Commerce Services and Penny Bows writ large and things continue to change rapidly in our world. And I'm excited to tell you where we're headed. Two topics only for today and I think the second one you'll all be excited about because I've gotten this question probably from every single one of you over the years and I've avoided it artfully, I feel like, but today we'll finally answer the question of when will Global Ecommerce be profitable and the answer is twenty twenty. But I'm going to make you wait just a little bit longer to tell you how that comes about, because first I want to talk about how we're continuing to win in attractive markets.
Fundamentally, Commerce Services is full of platform businesses. Platform businesses only work when they have scale. You have to get them to scale and the only way to get them there is to continually bring on more clients and add more volume to those platforms to get them to profitability. And so we can't get to profitability without continued growth and continued success with clients. And so I want to start there and then we'll move to the question on profitability.
We operate today in Commerce Services, what we would describe as four core platforms that make up the business. The first is Presort Services. We'll talk about it more in a minute, but the industry leader in presorting mail, already a scale business and one that we're using as a blueprint for how we're growing our profitability in Global Ecommerce. The last three platforms are all rolled up into Global Ecommerce. They are all, by definition, shipping businesses, targeting e commerce players, whether those be merchants, retailers, marketplaces or partners who help us access those markets.
But we're operating three distinct platforms in that business. The first one is cross border solutions. This is our ability to reach consumers around the world and help retailers and marketplace or marketplaces efficiently and simply reach those consumers. The second is shipping solutions. This is our technology assets around label creation and tracking primarily accessing the USPS for sure as our largest partner, but many other carriers and capabilities as well.
And then our domestic parcel business, which is both deliveries and returns, it's our ability to reach every household in The U. S. To either get a return back from that consumer to a retailer or get a delivery from a retailer to that consumer. Within that domestic parcel business, we also operate a fulfillment business. We think about fulfillment as an enabler for the domestic commerce or the domestic parcel platform.
We're in the fulfillment business to feed volume into that domestic parcel platform, which is why you don't see it here on the list. I want to distinguish those three shipping businesses that make up Global e commerce from what Jason talked about just a few minutes ago. Just to help you be clear about how we think about the shipping market, which is broad and how we work together across SMB and commerce services to serve it. In those three markets I just described, those three platforms, think of those as high volume shippers predominantly, meaning their core business involves shipping something. It is the business that they get done.
And they do that in the hundreds, thousands, tens of thousands or more on a daily basis. So we're focused on high volume shippers largely in my world in the e commerce space. So we're targeting merchants, marketplaces, and anyone who's shipping in an e commerce environment. To contrast that, what Jason described when he talked about his market for shipping, it's very much about the office space. So think about any business that is operating and shipping every day, but shipping is not a core part of their business and lower volume shippers.
So while Jason may have high volume office shippers, they tend to be fragmented across many, many locations. And so what they're shipping from any one given location is a relatively low volume. Similarly, Jason has many small retailers as part of his opportunity set in his client base, but they're shipping low volumes of parcels. The retailers and merchants that we're serving in the Global Ecommerce business are larger, and they're in the hundreds, thousands, tens of thousands in terms of their daily volumes. So just a way to think about how we work across the businesses on shipping to cover the whole market.
But as Jason said, and I'll reiterate, we're using the same technology platform to do that. So what underlies all of those businesses is a common technology platform that allows us to do label creation, carrier compliance, tracking one way that supports all of the SendPro assets that Jason described and all of the things I'll talk about as part of Global Ecommerce. We're participating in attractive markets across both parts of Commerce Services. For Presort, Presort is a 3,000,000,000 to $4,000,000,000 market, growing not growing, flat to minus 2%. So it's declining.
It is a mailing business predominantly, although increasingly, we're starting to grow in a space we call bound and packet mail. Think of that as things that come in flats, large thick envelopes, anything that you would describe as a packet versus a box. Bound and packet mail, we're seeing more and more opportunity for that in both the traditional Presort client base as well as the e commerce client base. But still, overall, Presort predominantly a mailing business that is in decline at flat to minus 2% and has a long term EBIT margin that we've talked about consistently at 15% or greater. On the Global Ecommerce side, today, we size the business at 40,000,000,000 to $44,000,000,000 across the world.
And this is more than double what we would have talked about last year at this time. And the reason for that is our capabilities continue to expand. And as they do, we relook at the markets we're participating in. And as you would expect, as we expand our capabilities, the market that is open to us and that we can go after is expanding as well. So we now see our market space as 40,000,000,000 to $44,000,000,000 growing at 12% to 14%, sort of in that sweet spot of where we see e commerce growing on a global basis.
Obviously, our share of that market is relatively low and we see that as exciting. We have a lot of room to grow with the capabilities that we have in this attractive space. So while we certainly expect to grow at the market growth rate, we have aspirations to grow faster than that given our ability to take share. The long term EBIT margins we see in this business are in the 8% to 12% range. So again, this is changing a little bit as we continue to expand our capabilities and as the mix of our business changes.
I'll talk more about that later. But Global Ecommerce is a constellation of platforms. Each one of those platforms has a slightly different profit profile. So margins on returns are different than margins on deliveries, are different than margins on cross border. And so as we balance the market and our participation in these markets, we see that EBIT margin, that target EBIT margin moving around a little bit as well, but still a healthy and attractive EBIT margin at eight to 12%.
I'm going to talk about both of these. I'll spend most of my time on Global Ecommerce, but I do want to touch on Presort briefly, building a little bit on what Mark talked about earlier. So Presort Services, by any definition, has an incredibly strong track record. So just to level set and remind us of the quality of work that, that team has been doing for years, we've been delivering above industry margins. So if you look at the last five years, four out of the five years, we were above that 15% EBIT margin target that we just talked about for the market.
The only exception was 2018 where we were just below at 14.3%. We anticipate getting back to those, and I'll talk about how we're going to do that in just a second. The second point I think is incredibly important. This is a declining market. It is a mailing business.
And yet Presort has continued to grow in the face of that. So five consecutive years in a row for the last five years, Presort has delivered positive growth in a declining market with a CAGR of almost 4%. It's incredibly impressive to think about. It's not a fast growing business, but it is certainly outperforming its market by a material margin and continues to do so. Part of the reason that Presort has been able to do that so consistently is the next point about best in class client satisfaction.
When you look at Net Promoter Score and you look at what is defined as world class, since we began measuring Net Promoter Score, Presort has been above that world class benchmark every year consistently and has improved every year we've measured it. It's an incredible statistic. The relationships that the Presort team has with their clients are unparalleled. And that has helped us sustain that growth and it will also help us continue to grow and deliver the margins above the industry rate. Finally, we're the largest workshare partner of the USPS.
And that's important because in a scale business, you want a lot of volume. So last year, we processed over 16,000,000,000 pieces of letter mail That represents 10%, more than 10% of the total mail processed by the postal service and more than 25% of the first class mail. So if you think about the volume of mail that is coming through our environments across our 38 operating centers within Presort, we play a significant role for the postal service in making sure that mail gets to you when it's supposed to and is effective in doing so. And we're very proud of that. So Presort has been and continues to be a very strong business for us.
Obviously, Q1 was not what we anticipated or what we expect from this business And we have a program underway within Presort to address that. And as Mark said, we've been at this for far longer than just a few months. We started working on this in 2018. We saw that we were going to come in just below that industry 15% last year from an EBIT perspective. And we began to build a transformation plan around four key areas.
And I think that the consistent theme across the four is that this is about data driven decision making. So what has changed in our Presort business over the last few years is the access to data and the amount of data and our capacity to do something with that data to improve our operations. And so we've built this on four pillars of activity. The first one is around standardizing the operating model. As we've grown and as we've expanded to 38 operating centers, two things have happened.
We've had proliferation of the ways we do things. So lots of different ways to do activities. At the same time, the market has moved. Compliance standards have changed. Technology has changed.
And so this is all about modernizing and standardizing our processes, making sure that we have new processes to deal with new regulations, new technology, etcetera, and that we're doing those consistently. So think of this as doing dispatch with less labor, doing a different thinking about quality control differently and managing that more efficiently. So that's on the operating model. The second one is staffing according to mail volume, which seems like an obvious thing to do and we've always staffed according to mail volume. But what we're able to do now is do this much more precisely with predictive analytics that allows us to take labor cost out in each of those operating centers, and we're focused on optimizing that labor.
Third is our transportation network. Again, better technology, better data, better tools is allowing us to optimize the routing of the trucks as we pick up mail from our clients and partners and bring that back to our facilities. We find a lot of efficiency opportunity there. And then finally, we're focused on aligning price to value. As we continue to grow, as we continue to invest, as we continue to gain strength in the market, we want to make sure that we're aligning the price that we're charging with the value that we're delivering.
And so we're spending a lot of time on pricing across the board and those improvements are starting to roll out now. So as we look at this transformation, it's a very organized, disciplined process as you would expect from a business like Presort. We expect the majority of the benefits to start to accrue as we get into the latter half of the year. And we think this is going to continue through 2020 as we continue to revitalize the profitability of Presort Services. Okay.
Let me turn to Global Ecommerce. We continue to fuel the growth for Pitney Bowes. You saw that a bit from Mark. You'll see it more from Stan later on. Three points, I think, are important to make here.
We continue to deliver above industry growth rates pretty consistently. We continue to build our scale, so processing now over 125,000,000 physical parcels and over 400,000,000 digital parcels. And the importance of the digital parcels is those are all running through our digital shipping platform and producing a lot of data that we're starting to use as we build new products and services. And then if you look at the trajectory over the last few years, we've added over $1,000,000,000 of revenue from a $15,000,000 business in 2012 to over $1,000,000,000 in global e commerce in 2018. So what's at the heart of that?
Our clients. So this would have been a very lonely chart four years ago. Four years ago today, we would have had one name on this chart. Today, there are over 800 clients and this is just a sampling of them. And you can see they span large marketplaces, large retailers, small retailers you've probably never heard of, international merchants, international 3PLs, all of whom are accessing our Global Ecommerce platforms and we're excited about them.
If you think about the growth of our client base, I think one of the things we're most excited about is we've really accelerated the pace of our go to market. We've brought it together. We've unified it across global e commerce. We have a single sales organization, a single client success organization, a single support organization. Everything that we do that's touching these clients is now done by a single team.
We've invested in that team and we're now starting to see some pretty incredible momentum in the market. So if you look at the last twelve months, think about the size and scale of this business, just over 800 clients. In the last twelve months, we've added two fifty clients and partners. The growth in our client base is accelerating dramatically. And we believe it is because of two things.
One is the services are resonating in the market. We have things that clients want to buy, which is great. Two is the unification of our of our go to market is allowing us to do a better job at things like cross selling into the base. So selling into our existing clients more products and services. And then importantly, when we go to new clients and we bring on the two fifty clients that we anticipate adding over the next twelve months, we're not just selling them one thing, we're selling them multiple things.
And so we're bundling in a much more effective way because of the way we're organized. We're also making significant investments in our client experience. And the reason why that's important is because in a volume based, scale based business, churn can kill your path to both growth and profitability. So we have been making real purposeful investments in the client experience around tracking the speed of our network, both the speed in which we get the returns back in and therefore get the money back to the consumer as well as the speed to deliver parcels on the outbound. We've invested in our back office and in our invoicing.
So as an example, our border free invoices will revitalize, will roll out in the next month, a completely new invoicing approach in Border Free. The invoices we send today are essentially done on Excel spreadsheet and each one is unique and individual. And the investments we're making to automate and improve our back office are going to have direct impacts on our clients. And we've invested a lot in our client support organization to make sure that when clients have issues, we're there for them in an effective way. And those investments are paying off.
So if you think about our churn rate this year, year to date, it's low single digits, very low single digits. We don't think that's an accident. We think that is directly tied to the investments that we've been making. So why do we win with clients? I put this in here because we are competing against many giants.
And it's important to know that we're not trying to win everywhere and we're not trying to win at their game. We're trying to win in niches and segments and capabilities where we have a unique capability to win, and we're also approaching the market in a different way. And those two things we think are really helping us win with clients. There are three aspects of it that I wanted to touch on. The first is that we're building our services purpose built for consumers and e commerce.
And it's really important. Consumers are getting more and more demanding every year. I'll give you a few examples in a few minutes. Competitors were not built for that. They built their networks.
They built their services. They built their capabilities for a different world and they're retrofitting e commerce into it. Pitney Bowes has the advantage that we built our network for e commerce. It gives us more flexibility to handle the unique demands of e commerce, and we think that that helps us win today. And increasingly, that focus on the consumer will help us win going forward.
The second one is that we make our clients' brand the hero. And that may sound like a small difference, but retailers are competing against Amazon. And the one thing that they have, the one differentiator they have is their brand. And many of our competitors have decided they too want a consumer brand. And they fight for control over the experience with the retailer or the merchant.
We have no interest in having a consumer brand. We're in business to make our clients successful and we want to make their brands the hero. And we do that in any number of ways every single day. Custom packaging in our fulfillment business. You'll never get a box that's branded Pitney Bowes.
That's different than others in our space. Branded tracking. When you when you come to track, I'll show you the example in a second. We want that to be an experience with the retailer that you bought something from, not with your carrier. Your carrier shouldn't be the interface.
We think that's important. And we've always done retailer specific demand generation, marketing on behalf of our retailers in our cross border space. We have over a million global consumers who have accounts with us that we use directly to market our retailers brands. These are important examples of making the client's brand the hero. This matters a lot to retailers and this resonates almost more than anything else when we have conversations with them.
And then finally, we are at our core a technology company. And so we use technology and increasingly data science to solve problems in a different way than our competitors. I'll give you an example because this one's a little bit hard to think about. Last year, we had an issue in our cross border business. We need to know country of origin.
When you're shipping across borders, you have to be able to declare the country of origin. It seems like a simple thing, but when you're serving retailers that don't have or marketplaces that don't have great data about their products, often we don't get the country of origin. And so what do you have to do? You have to open up the box. To open up the box, you have to look at it, you have to figure out the country of origin, you have to enter it in, and off it goes.
You can imagine that's an expensive process. Most logistics competitors would have looked at that process. They would have brought in a Lean Six Sigma continuous improvement expert. They would have got out stopwatches, and they would have figured out how to do it. What we did is we stepped back and said, we've shipped millions of these things over time.
We have a great set of data. We use data science to solve the problem. We use our machine learning and our AI capabilities. We can now predict with a level of accuracy the country of origin that allows us to not open a box. So we cut the processing from open box to closed box, which is a lot cheaper dramatically without thinking about continuous improvement and without stopwatches, but using data and data science.
It's just one small example of how we can improve the speed at which parcels move through our network and the cost of processing them using a very different way of thinking about problems. We think this really differentiates us and in our client conversations, they tend to agree. So I wanted to give you just a few quick examples of what we're up to. Consumer Connect, something we announced and launched just a few weeks ago. This is a great demonstration of those three differentiators.
Recognizes the importance of the consumer, puts the retailer's brand first and is a really slick technology solution. Essentially, this is the place you go to track your packages with a retailer that works with Pitney Bowes in the go forward scenario. Consumers are highly engaged in the tracking experience. So we have billions of tracking records. We know how often people track.
People track a parcel eight times on average before it reaches them. So think about from when you hit the buy button to when it lands on your doorstep, on average, a US consumer will track eight times. And I I see you shaking your heads, many of you. I've never tracked a package eight times. I'm a one or two times tracker, but I have a teenage daughter.
And I've observed her in the wild and she counterbalances my one to two with 18 to 20 and that's how you get to eight. Okay? So it seems unbelievable, but it it's right there in the data. So if consumers are really engaged in the tracking experience, if you're a retailer, you don't want your tracking experience branded by the carrier. That makes no sense.
Right? You want that to be an engaged experience between your consumer and your brand. And we've created consumer connect to do that. It allows you to use social media, cross selling links, allows you to sell them new things, teach them more about about your brand, create an experience both on the delivery and the return that is branded and is engaging and is deepening the relationship between you as the retailer and your consumer. The other thing about this, which is the technology that's important, is this is self configuration tool.
So if you can send an email and every retailer, no matter how big or small they are, can send a marketing email, you can configure this every day to look and feel different. New pictures, new colors, new branding, special for a holiday, special for a sale, whatever you want to do. You can change it every single day. So we think this is a great differentiator and a great example of where we're going and we just launched this in the market as I said a few weeks ago. The next one I want to talk about is three day guaranteed delivery in The U.
S. This is a new product service we have in beta testing and we're extremely excited about it. And the concept here is simple. What you see in the chart is that when you ask consumers again, we're going to start with the consumer. When you ask consumers, if shipping is free, what is an acceptable time to receive that package?
And what's fast and what's slow? And what consumers will largely say is, I prefer two days or less, but three to four days is still acceptable. Now that's getting faster. I expect when we do the survey again this year, that line is going to shift to the left. But we know we've got to get faster.
Our network, our standard delivery offering is a five day service. We need to move that to be a three day service. And so we're investing in two things. We're investing in the network for sure and we continue to expand the number of locations where we're sorting parcels which allows us to get closer to the consumer. But at the same time, we're starting with data just like I talked about before in the example that I used.
We're using those billions of tracking records. We can tell you with a high degree of accuracy how long it takes to deliver a parcel from every origin zip to every destination zip code in The US across multiple ways of transportation. Whether that's through our own network, whether that's through the United States Postal Service in a different way like a priority mail or a first class mail. And we're using that and connecting it with a decisioning engine that we've built that allows us to select the lowest cost way to get something from a particular origin destination to your house. And we can do that guaranteed because we know with such a high degree of accuracy when it will arrive, not only will we say it's a three day service, we will guarantee it's a three day service.
And if it doesn't get there in three days, we refund the shipping. We think this is a win win, both the speed three days because it fits with what the consumer wants. But the guarantee becomes really important for the retailer as part of their consumer promise. It's now a marketing tool. I'm guaranteeing it in three days.
I can market that. It helps their conversion rate. We're in beta testing with a few of our fulfillment clients at the moment on this service, and it's going extremely well. This is something we won't roll out full scale until 2020, but we will be ready to hit the ground running. We're really excited about what this has to offer for us going forward.
I'll touch briefly on the technology platform, which is our shipping API platform. You probably remember or you might remember seeing this version of this last year. We continue to expand the services that are available to our clients through a single technology platform, which we call our shipping API. This is much more than what our competitors are doing. We are not allowing access to a single service.
We're allowing access to an ever expanding list of services that span domestic and cross border, that are postal and multi carrier, that provide access to the financial services that Chris talked about before, which 85% of our shipping clients take advantage of through a single technology interface. This is incredibly important as we think about the cross selling I mentioned before. Once I have a client that's connected to, let's say, USPS label creation, if they're interested in our own domestic parcel network, we can now logistics we can now put them directly into that through the integration that they've already done with our shipping API platform. It's a really exciting example of using technology to accelerate our progress in the market. Last one I'll highlight is international inbound to The U.
S. We think of ourselves as cross border, but historically cross border has been primarily US to the world. What we're doing now is we're turning that capability around. We recognize that with our shipping technology capabilities, you access this through that shipping API. With our cross border know how, we know how to cross borders, we know about customs, we understand the regulatory environment, and access to our domestic parcel network, we've created a very innovative solution to get from everywhere to The US consumer.
And we started with China and The UK and we're seeing a tremendous amount of growth particularly as we focus on what consumers want. This needs to speed up as well and we can provide a faster access to The US consumer than many of the other alternatives that these shippers, marketplaces, retailers have at their disposal today. We're excited about where this is going. This is a big part of fueling our growth in 2019 and beyond. And again, I think the important thing is this is something we wouldn't have been able to do a year ago or a year before that because it really requires the fulsome capabilities across the three different platforms of Global Ecommerce to bring it to life.
Okay. So just to recap that, attractive markets, consistent track record of winning with clients, continuing to innovate around the consumer, putting the client's brand first and around being technology and data science led. We're both investing in Presort and the transformation. We expect that to get back to above market margins. We're excited about where that's going.
We also expect Presort to continue to grow in a declining market, which is terrific. And on the Global Ecommerce side, we think that what we're bringing to market now in line with our differentiators and in line with the very productive conversations we're having with clients, we will continue to outpace market growth in global e commerce. So let's talk about profitability. I'm going to come back to this notion of platform businesses. I've made the point before these are platform businesses, four of them, presort, cross border, shipping, domestic parcel.
If you think about platform businesses and there's a lot written about platform businesses. So this is a simplification of that. But in general, platform businesses have this type of profitability curve typically. You invest a lot upfront to build the platform. Then you invest a lot to acquire clients, to build scale.
And at some point, you build sufficient scale that you cross over that profitability line. You can now support both the ongoing maintenance of that platform you built as well as the depreciation of the asset and the amortization of that asset that you've built. And once you cross over that profitability curve, as you continue to build scale, you will eventually reach the amount of scale that's required to kind of level off that profitability at a very attractive long term rate. This is kind of how it works. We're lucky at Pitney Bowes and within Commerce Services.
We have one of these that's at the happy end of this curve, which is Presort Services. Presort has reached scale long ago. I mentioned before the profitability we've seen over the last several years and continue to see 16,600,000,000 pieces of letter mail. This is a scale business. It performs well.
It has great margins. This is what we aspire Global Ecommerce will be as we build that scale. And when we look at Presort Services, we think about how did this happen. Right? And so it's pretty straightforward, but not easy to do.
So essentially, Presort Services built scale. They went from 12 operating centers to 38. We currently have 14 operating centers in our global e commerce business domestically. So think about the parallels. Mail volumes increased by, I don't know, I can't even do that math, but a lot.
2,500,000,000.0 to over 16,000,000,000. That is an incredible trajectory of growth in volume that led to the scale economics that we're benefiting from today that you can see here. So how did they do it? We're following this exact same formula in Global Ecommerce. You have to expand the network.
Right? You can't handle more volume in the same facilities you have. We've increased the number of facilities already in our domestic parcel business since we made the acquisition of Newgistics with five new facilities in eighteen months. We will continue to do that throughout 2019 and beyond. Volume growth.
It is so important. You cannot get to profitability or at least not long term sustainable profitability without scale, And you need the volume to get to scale. Client experience focus. I talked about this a bit already. You cannot afford on the journey to scale to have a lot of churn.
It is too hard to acquire clients and to acquire that volume to let it leak out the bottom. You have to hold on to the clients and the volume. And the only way you can do that is with an outstanding client experience, which Presort has certainly delivered and I feel like we're on a great path to doing in the global e commerce business. And then operational excellence because scale is great, but scale alone is not enough. You have to operate efficiently and you have to constantly focus on the improvement of your operations.
And I think what we're doing today in the pre store transformation is a great example of that. You have to continuously think about how do we improve the operational excellence because just because you have the scale is not a guarantee of the margins. You have continuously get better. This exact formula is what we're focused on in Global Ecommerce. And you can see when we've been talking about the investments that we've been making, the things that we're doing, the services that we're putting forward in the market, it is around this basic formula.
So where are we today? Global e commerce is progressing along the maturity curve. We are importantly not below the double pink line. We're in between the two, which I realize is not as satisfying as you might like. But we are EBITDA positive, not yet EBIT positive.
If you look at 2018, minus 3% EBIT margin, but a positive 3% EBIT margin. We are marching along the curve. We have more investments to make, but we continue to march along the curve. So what I thought I would do and we don't have time to do all of them, but I thought I would give you more insight into the economics of these businesses and why scale and efficiency are so important. Because understanding what drives the cost helps you get your head around the path to profitability and how we get from here to there.
So I'm going to focus for the purposes of this example on domestic parcel. So this is our logistics business less the fulfillment. So this is the returns So all of the domestic parcels that go through our network are in here. We manage this on a unit economic basis. We manage the other platforms within commerce services on a unit economic basis.
It's the easiest way to manage the business day to day. So let me just outline first what the costs are that are in here. So the first piece is postal. It's the largest component of our cost. It's over half of the cost in our domestic parcel business.
And this is what we partner with the United States Postal Service on for last mile delivery of parcels and the first mile, if you will, pickup of returns. So when you leave that return on your doorstep and your mailman comes by and picks it up, that's what we're paying for in this cost. It's it is incredibly cost efficient. So it is more than half of our cost, but we could never replicate this on our own. This is why we love the Postal Service.
They have a highly scaled network of their own for delivering last mile parcels. We leverage that through our partnership with them. And this allows us to reach the consumer in an efficient way even though we're not yet at scale. So there are ways to improve this as we get greater scale. I'll give you a couple of examples.
We deliver parcels to DDUs. DDUs are essentially your local post office. We hand it off to the postal service and they bring it to your house. Excuse me. In some cases, we don't have enough volume to economically get to your post office.
And so we go one step further up in the USPS network and we pay them more for that because they're doing more of the transportation and more of the work. The more volume we get, the more we can go to those endpoints, those DDUs that helps us lower our postal cost over time. We've seen that happen in our network as we've built more scale over the last twelve months that will continue. So this cost can go down some, but there's a limit, Right? This is based on the postal service economics.
So there's a limit to how much you can take out of this. We have more room to go as we scale the business on this piece of the cost. And importantly, this is probably although it's more than half of our cost, this is the reason we can compete with the big guys because we have an efficient way to reach the household of every consumer in The United States. Second component of cost, I would just put in a bucket called operating cost. There are three big things in there.
The warehouse costs, think of this as all the labor that's required to sort those parcels and move those parcels around. Transportation, right? So we've got to move parcels between our retailers and our facilities, intra facility and between our facilities to those DDUs or post offices. It is an incredibly large portion of our cost and we manage our transportation closely. And then you've got just it says G and A, it should be SG and A.
This is all of our selling expense, our go to market, our G and A, and our technology spend. Some of it, the maintenance of our platforms fits in this G and A bucket. This is a place where we don't necessarily need scale to get better. So operating efficiency, operating excellence can help us here. So things like automation.
We're investing in automation to reduce our labor costs. We're focusing on integration between Presort and our domestic parcel network, which is allowing us to put mail and parcels on the same trucks. Full trucks cost less than half empty trucks. So putting twice as much stuff on the same truck is highly beneficial for our economics so that integration synergy we're still reaping the benefits of. Continuous improvement.
Same thing we talked about in the pre sort transformation, maturing and standardizing our processes here. This is a startup that is continuing to mature and every day we're focused on what can we do better, how can we standardize it, how can we make it the same across our 14 operating centers, and how do we make that go faster and more efficiently over time. And then the client experience. As we make the client experience better, the investments we already talked about, that helps us lower our costs. So as our tracking gets better, we get less calls into our client support.
As our invoicing gets better, we have less manual operations on the back end and we get our cash faster because the invoices make sense. So we're making a lot of investments to lower operating costs at our current scale. A 110,000,000 domestic parcels in 02/2018, we can lower this bucket of cost at that level of scale. But scale does have the biggest impact. And the reason it does is about capacity utilization.
Full trucks, full buildings, scaling the G and A over a larger base. All of that helps our unit economics. And we continue to focus on getting to the scale, the sufficient scale we need to get to profitability and beyond. And then finally, investments. It's actually the lowest portion of our cost.
It's the one we tend to talk about the most. Represents less than 10% of the cost in this domestic parcel business. It's balanced across growth initiatives, things we're investing in from a technology standpoint and an infrastructure standpoint to support growth, but also efficiency. All of those things I just described around lowering our operating costs from efficiency require investments, investments in technology, in people, etcetera. So there's a balance here across both growth and efficiency.
And while we expect over time, you get more parcels, you spread this out, we still have a lot of investment in front of us partially because we're so excited about the growth opportunities and partially because this business has more time in front of it to mature. So we don't expect the investment percentage to reduce that much. But again, it's the smallest portion of the cost. So if you look at this in total and you start to think about how does this evolve with time and scale, We start, that's the exact chart you just saw, right? We talked about before, we were at plus 3% EBITDA margin minus 3% on an EBIT basis.
We make the efficiency improvements. We continue to get scale benefits. And over time, this lands at roughly a 10% EBIT margin in that range of eight percent to 12% that we talked about earlier for the market with a, give or take, 15% EBITDA margin. So what does scale mean? The way we think about our cost structure is we think we need to get to 250,000,000 domestic parcels to be at scale.
So at those long term margins. Based on our growth rates, our projections where we think we're going, we believe we will exit 2022 at scale and therefore in these in this range from a margin perspective, exiting 02/2022. If you looked at the same exercise for cross border or shipping and even if you broke domestic parcel down into returns and deliveries, you would see slightly different dynamics. You'd see different initiatives, different things we're doing. But the general scope of this is the same.
We're focused on efficiency improvements, and we're focused on scale. Those two things will lead us to that long term profitability that we need. So that's where we were in 2018 between the two pink lines. 2020 will be above that EBIT breakeven line. And that's a really important and profound thing for us to say today because we believe we have set the foundation to deliver the scale and the growth and the efficiency improvements that will allow us to move this business to be EBIT profitable as Global Ecommerce.
I will remind you of something I said before, which is that Global Ecommerce number is a blend across the platforms. The different services that we offer within Global Ecommerce have different profit margins, not wildly different, but different enough that we're managing and we need to manage closely the growth rates to make sure we continue to grow not just deliveries but also returns, not just cross border but also shipping. We've got to progress so that the mix of this business continues to deliver the profitability that we're expecting. But we feel excited about and confident about telling you today that we'll be profitable in 2020. That said, we are going to continue to invest for the long term and so that investment line will continue to be there.
So let me just summarize. We continue to win in attractive markets. I hope I've made a compelling case for that. Presort will get back to above market margins. We're executing on a detailed plan.
We're focused on the right areas, and you'll see the benefits of that starting to come through in the remainder of 2019. Global e commerce is winning in the market. What we are selling, what we are doing, the services we're providing are resonating with clients. We are accelerating our client acquisition. Two fifty new clients in the last twelve months is an amazing number for us.
And it's not just the clients we're bringing on, but it's the partners that we're bringing on that give us access to a whole host of other merchants and retailers and e commerce providers that we wouldn't be able to reach on our own. So similar to Bob, we're focused not just on a direct sales model, but selling very effectively into partners who access this market in a different way. We're innovating in the places that resonate with the market. We're innovating around consumers and what consumers want and what consumers expect. And when consumers are happy, retailers and merchants and shippers are happy as well.
We're putting our clients' brands first. We're making sure that the clients' brand is the hero, that we're strengthening their relationship with their consumer. We're strengthening their Net Promoter Score by the services that we're providing for them and on their behalf. And we will continue to innovate around technology and the use of data science to stay one or two steps ahead of our competitors, thinking about old problems and new ones in a different way. We believe our growth will continue to outpace the market.
We have consistently shown the ability to do that. We don't see that stopping anytime soon. At the same time, we will be profitable in 2020. We're putting a stake in the ground. We feel confident about it.
And the reason that I feel so confident about it is I know what we're doing from an efficiency standpoint. I know that that is helping move us in the right direction. And the volume growth that we need to get above that profitability line is in our sites. We'll continue to win with clients, which will lead to more volume, which leads to profitability. Thank you.
Ladies and gentlemen, we will now take a ten minute break. Please be back in your seats in ten minutes and we'll continue. Thank you. Ladies and gentlemen, we'll begin again in five minutes. Please begin to take your seats.
We'll begin in five minutes. Thank you. Ladies and gentlemen, we'd like to get started again. If we can take our seats, please. We'd like to get started as soon as possible.
Thank you. Ladies and gentlemen, welcome back. Please welcome Stan Sotulla, Executive Vice President and Chief Financial Officer.
Well, thank you for coming back.
So this morning, you've heard from all of our senior leaders about the Pitney Bowes business. And I think you'll agree with me that if you go through each individual business, all of them are transforming. It isn't just that one piece is growth. It isn't just that one piece is changing their profile of the business. Every part of our business is evolving.
So today, I'm going take you through the financial update, the financial model. I'm going cover three things: first, that our business and financial model continues to shift to growing markets second, that revenue growth and spend optimization contribute to long term earnings and free cash flow expansion over the time frame and then finally, we've built a flexible capital allocation strategy that supports this evolving business model. Let's start with the business model shifting to growth. So you heard each of the business unit leaders talk about where they fit and what market they play in. I want to pull that all together.
Start with Commerce Services. Global e commerce, a growing business. So 40,000,000,000 to $44,000,000,000 addressable market size, growing 12% to 14% with a long term EBIT margin of 8% to 12%. Presort Services in a market of $3,000,000,000 to $4,000,000,000 running from minus 2,000,000,000 to flat and growing a long term EBIT margin of 15 plus percent. I'll remind you that our Presort business has actually been outperforming on the revenue and for the last five years, the EBIT margin, talking about economies of scale and experience.
Software Solutions, a large market, 23,000,000,000 to £25,000,000,000 growing 9% to 11%, with an EBIT margin in the 15% to 20% range. And then as we talked about SMB, Jason took you through the changing dynamics of his market. So $2,000,000,000 to $3,000,000,000 of mailing, declining 5% to 6% and a shipping business, which we're participating in, that is a 2,000,000,000 to $3,000,000,000 business growing 9% to 11%. So Jason is shifting his business through time. We expect that the long term EBIT margin of the SMB business will remain in the 30% to 35% range.
Now underlying this, Christopher took you through how third party financing creates an additional value play for Pitney Bowes. So if you step back and you look at the financial model we've been building, where we've been going to in the businesses, it's a model that has shifted to growth and profitable growth. So let's step back and look at the revenue. So as we've shifted, if you take a look on the far left for 2016, on the bottom left hand corner, you'll see market growth. And that market is if the growing our mix at the market rates, we would decline 1%.
Now Pitney Bowes actually declined 5% at this point. And you can see that mix of businesses in the far left. SMB made up 54% of the revenue composition. Commerce Services made up 24. Production Mail made up 12% and Software made up 10%.
As you move to 2018, you can see how quickly this portfolio is evolving. So SMB now makes up slightly less than half, commerce services now makes up 43% and software makes up 10%. And we divested production mail. That's part of that continuous portfolio evolution. Now importantly, you can see the movement.
So as we've shifted the overall business, at the market growth rates, we'd have grown 2%. But at our mix and what we've done, we were able to grow 3%. Now looking out over the long term, and you've heard it through all the business leaders today, they've talked about we're defining that what is the long term, and we're looking at 2022. So we expect that the market growth with our composition that we'd be growing 5%. We expect, though, that with the expansion of commerce services, as Lyle told you, we have consistently outperformed that market growth rate because of the mix of our business, and we expect to be able to do that for the foreseeable future.
So as we look out to 2022, we expect to be able to grow in the mid single digit 5% to 7% range. I just want to pause there because in a relatively short period of time, we've taken Pitney Bowes from a business that had declined for a very long time. We put together two consecutive years of revenue growth for the first time in a decade, and now we're looking at moving the business on a continuous basis to grow mid single digits. Now Mark showed in his part of the presentation and spent time talking about transformation. It is far easier to transform a growing business than a declining business.
We believe we're well positioned here as we go forward. So this business model is grounded in a combination of synergistic services. How does this all come together? If you take a look, you saw a theme through all the presentations, and you have shipping and mailing that covers our presort business, our SMB business and our global e commerce. Christopher took you through financing, which supports a number of these opportunities and cuts across shipping and mailing.
And Bob took you through our software business. Now the software business is an enabler for other parts of our business, but we've also grown that business for two consecutive years. And Bob talked about the partner play and the data play, which will sustain that going forward. On the bottom of this chart, what you see are some natural adjacencies of these businesses all tied together, And we have embedded software capabilities. I think a very good example of that are the shipping APIs.
This started with Lila's first customer. We built upon that, took that out to market and we're able to expand those capabilities and those offerings. Christopher finances a number of those. Now we bring those capabilities into SMB and offer them to over 750,000 clients with good traction. Core competencies.
We continue to shift this portfolio, but as you heard today, we know what we're good at and we know what we're investing in. So as we look out in time, we're looking to build upon those core competencies. And one other theme you heard today, in particular from Lila and from Jason, the USPS is an important partner. We're a very large partner with USPS, but we're a work share partner first and foremost. We have we do work share partners with Presort as a good example.
Those 16,600,000,000 pieces of mail are the most profitable pieces of mail for the USPS. So this work share partnership, we've built upon that throughout the business to be able to expand our offerings. And then finally, you heard a couple of times today, integrated Commerce Cloud. I just want to pause for a minute on this one. This one doesn't get a lot of airplay, but actually becomes one of the great foundations for why we've been able to move at the rate and pace we have.
So the Commerce Cloud, as we've invested into those capabilities, that's a combination of the ERP system we've put in place in North America and the web capabilities that we've built out, but that's allowed each of our businesses to develop a digital relationship with our clients. It allows us to sell the majority of our supplies on the web and bring more and more product offerings to our clients in a much more efficient manner. So I want to move from overall business model into revenue growth and spend optimization. This portfolio shift is creating sustainable revenue growth and earnings expansion. So commerce services growth and profitability.
So commerce services has grown rapidly, and we've answered the question a number of times over the last few years because we keep investing in that business, and we will keep investing in that business for the long term. But that growth has been important, and doing it off of scale and efficiency over time builds a good foundation for long term. Now Lila talked about being profitable in 2020. We were EBITDA positive last year, dollars 28,000,000. Now as we look and combine that combination in with SMB and what we call new client value.
So SMB was a business when I first came in that I spent a lot of time staring at. It's highly profitable, great customer relationships for a long time. But we've added on to that capability by bringing shipping in. And I think the exciting part is we're still very early into that journey. While we placed over 80,000 Senpros C, the capability, the Senpros tablet that you see, that brings a lot of new value into the equation.
I also think that third party financing, which you heard Christopher talk about, is a great asset that we can bring to our clients. When I first came in and I was going through and I spent time going through that business at our first one of our kickoff meetings, I put up a chart, and it said that GFS was the hidden gem of Pitney Bowes. I think the ability to bring these financing offerings to a wider set of clients through third party financing is a really exciting way to add value. And then software partner and channel contribution. So Bob's business had been a business that had kind of run steady and was in slight decline, and now we've grown it for two consecutive years.
More importantly, we've invested in the core capabilities and the partner channel to deliver incremental value to our clients. That partner channel, if you caught it in Bob's charts, has added incremental pipeline, more importantly, incremental lift pipeline, where they're going out and originating these to our portfolio. That gives us confidence that we'll see improving performance in software, which has a nice leverage model as it grows. Now with all that, that revenue growth, you're going to see that, that brings incremental profit over time and incremental cash flow over time. So let me walk through each one of the segments.
Commerce Services, which I'll just remind you, Commerce Services, again, is Global Ecommerce and Presort together. As the model here for top line growth is low double digit, and you've seen what's been the last couple of years here, and we expect that to continue. That will continue on the strength of domestic parcels, think about logistics, cross border solutions, shipping solutions and then bound and packet mail, which Laila talked briefly about, which is part of Presort. We like I think that's a good example of economies of scale and economies of experience. So if you think about the Presort business, it has 38 centers across The U.
S, leading market share, great customer satisfaction. So you have all this infrastructure laid out. Bound and packet mail, the bubble envelopes, the flats that you think of is an area that we had not played in, in a material way. We have the scale, we've got the labor, we've got the transport, and now we've made an investment into sorter technology to help us go after that activity. That is a growth item for Presort.
So we expect over the term that Commerce Services will be able to deliver low double digit revenue growth. Now from an EBIT perspective, you've seen an inflection here. So an EBIT perspective, as we go through, we expect to be able to deliver double digit growth year on year and an EBIT margin that's low double digit. Importantly, it starts with Global Ecommerce delivering EBIT positive growth in 2020. That's going to come on the basis of the investments we've made over the last several years, including to drive parcel volume and scale, expanding the network.
We added four locations in the second half of last year, consolidated two, and we added three more so far this year. So we're making investments to build at this scale to give us capacity to sell into on a future. Operational efficiency. As you can tell from the CFO, operational efficiency is something we do all the time. And you heard it through a couple of the presentations today, it never ends.
We've grown very rapidly in some of these businesses. And as we do that, we continually step back to look at what we've built, what needs to be tweaked, what do we need to change to improve the client experience. It always starts with the client experience. How do we improve that and that will bring efficiency? That client experience has led to the success.
I think one of the interesting parts you heard through several of the presentations today is we have things that clients want, why we're seeing a turnaround in these businesses. So let me move to SMB. First, we're going to see that revenue decline moderate, driven by growth in shipping as well as third party financing. The third party financing adds, again, talking to clients, something that they were looking for. We have a great reputation in the market.
We have the capability to fund this, and it's highly profitable. So it's a great adjacency to build out for SMB. Shipping capabilities. Jason took you through, and you saw an example of the tablet. We have increased the innovation in this area significantly.
So that doesn't happen overnight. We made significant investments in technology that brought SendPro C to market, and that was a relatively short time ago. Now we're going to roll out over 20 new products to the international market. We're bringing shipping capabilities, the analytics wrapped around that and the ability to finance that to this marketplace. It's a real competitive differentiator.
The other ability here is the new value beyond shipping. So we talked briefly about that today, things like the apps on the device. That's a stream that we have not monetized in any material way, but I think represents an interesting opportunity to partner with others in this ecosystem to bring value to clients. Now SMB EBIT. This is an area that, as we've gone through, we saw that revenue declining over time.
As we've moderated that, we've also brought efficiency to SMB. So investing in the shipping capabilities, the third party financing and working through operational efficiency, we expect that as we get to 2022, we'd be able to deliver flat to low single digit growth on a year on year basis. It's been a very long time since we've talked about SMB profit growing on a year on year basis. We expect to be able to maintain those margins because what the value we're bringing into this for our clients is also high margin. So SMB, this is a major milestone combined with Global Ecommerce delivering profitability, which as we look out in the future, brings us confidence in a long term business model.
Software. So after two years of consecutive growth, the things that we've invested in, the portfolio that Bob has out there with customer information, location intelligence, you heard all about data, customer engagement and then using the partner channel as a new go to market is why we believe we'll be able to improve the revenue growth to mid single digit over the term. Now this is also important because software is a profitable, leverageable model. So as we grow revenue through all these offerings and leveraging the partner channel, that will also deliver incremental profit. So we expect mid single digit profit growth year on year as well as a mid teen EBIT margin for the software business.
So let's put the portfolio in context. If you look at the portfolio, this shift to higher growth markets, not just in one business but across the entire portfolio with commerce services delivering low double digit growth SMB, a low single digit decline and then software, mid single digit growth, that will put us in a trajectory to deliver mid single digit growth over the long term. Now transforming a company, its transformation doesn't end when we get to 2022. One of the things I love about what I see at this company right now is I see the pace of innovation increasing across the portfolio. The investments we're making, the creative ideas that are coming with it will sustain that revenue growth over the long term.
SG and A as a percent of revenue. So as we think about operational efficiency, this is one of the key components. So obviously, growth helps. If revenue growth is improving, it's a lot easier to hold your expenses flat and let revenue growth go up, but we'll see an improvement to our E2R simply from revenue growth. But shared services and corporate structure are another area that we have made more efficient through time.
And I actually think we've actually made it better through time as well, better service to the units, better service to our clients, and we've streamlined how we approach this through a corporate structure, and we simplified what we do. And that simplification and optimization is not just in shared services. That's in how we run the businesses day to day. It results in an improved client experience, better decision making, faster decision making and better able to serve the market. But we believe we're going to be able to take out and improve the EDR by over 500 basis points between 2018 and 2022.
And I would look backwards for some proof points on our ability to do that. We have taken out significant spend from the overall business over time and use that to reinvest back into the growth and the transformation of this company. So revenue, combined with that spend optimization simplification, is going to drive overall EBIT growth. So we believe as we get to long term that we'll be able to drive double digit EBIT dollar growth with a mid teen EBIT margin. And if you look at that and go back by the units here, Commerce Services will deliver double digit growth on EBIT dollars SMB, flat to growth on EBIT dollars.
I just like saying that, flat to growth in SMB on EBIT dollars. It's been a long time, and the team has worked really hard, but we see a good line of sight to that. And then softer mid single digit growth. Again, compare back to five years ago, this is a remarkably different company that we have in front of us today as we look ahead. So let me put this together in a long term financial model.
So again, this chart is meant to represent twenty twenty two year over year change. So commerce services will represent over half of the portfolio, 55% to 60%, delivering low double digit revenue growth and double digit EBIT dollar growth and a low double digit EBIT margin. SMB, 30% to 35% of the portfolio. So a big change through time, where just a few short years ago, it represented over half of the business. Low single digit decline in revenue, flat to low single digit growth in EBIT and a 30% to 35% margin.
And then Software Solutions. Roughly about 10% of the portfolio because while it's growing mid single digits, the growth of the rest of the portfolio is also continuing. Mid single digit growth on revenue, mid single digit growth on EBIT dollars and a mid teen margin. So when you put that all together for Pitney Bowes, mid single digit revenue growth for the company with double digit growth in EBIT dollars and a mid teen EBIT margin. So let me move to the next section here, and that's our flexible capital allocation strategy.
We spent a lot of time around capital allocation because it's so important to to support the business. And if you take a look at that strategy, it starts with continued investment. So what you heard today from each of the business leaders is investment into their business. Now that investment is funded through a combination of items. We obviously have gone out and done some acquisition.
We've invested in capital. But all the spend that we've taken out of the business, we've also reinvested a chunk of that back into that business, new capabilities. And we've done that through portfolio evolution. Now sometimes that's acquisition. We did our largest acquisition in late twenty seventeen with Nugistics.
And sometimes it's divestitures for things that are no longer strategically important to the portfolio like our production mail business. We're balance sheet focused. Now we look at the long term, we look at the health of the balance sheet, and that's an important part of our capital allocation strategy. And then, of course, return to shareholders. So I want to spend a minute on how we're supporting the revenue and earnings growth.
Continued investment. Think about what you heard today from each one of the leaders. These are just a few of the examples that we've invested heavily in. So shipping capabilities. Everything from shipping APIs, which we are doing for a client that now we have an offering into the marketplace, we offer broadly out there through a number of partners and we brought to our SMB business.
Third party financing. We've been deliberate, and I'm going to use that word deliberate here, to build a rock solid base on a third party platform with the right industry experience, the right risk profile, but that leverages the strengths of Pitney Bowes. It leverages the bank, leverages the deposits and it helps optimize the long term future. Automation. So automation takes the form of a number of different areas.
We've invested in automation in Presort. Now in presort, we have one of our facilities that we did a total sorter refresh, and we've nearly doubled the amount of throughput per hour of what that facility can handle. That's a great investment with a strong ROI. We've also invested in auto sleepers. But we're deliberate here.
We do the business case, we look at what the return is going to be, and it has to be an acceptable rate of return. But that automation allows us to get more capacity and more throughput through existing centers. And then network optimization. So we've invested in facilities that Lila took you through. We invested in four in the second half of last year, consolidated two to get more scale.
Then we invested in three so far this year. When we look at the portfolio, the portfolio has evolved significantly. Now we look at inorganic components of the portfolio, we're investing for long term growth. Now that could be something like logistics, it could be a technology plug in, but all of them have similar themes. It has to be strategically coherent and it has to deliver synergy to us and to our business model.
And it has to drive an acceptable ROI. We have a very strong discipline on acquisitions. We have walked away from ones that don't make financial sense. And that's important because we want to make sure we use this capital effectively. And as we think about the portfolio, we look at what has that strategic coherency.
Is it a market leader? And you've heard through a number of these that we're very well positioned in a market with our businesses. And if it's not a market leader, does it have an acceptable plan to get there? And then obviously, it has to earn an acceptable return for the portfolio. So let's talk about debt and the maturities that we have coming up.
You can see maturity profile across the graph on the left. But since in 2018, we reduced nearly $600,000,000 worth of debt. This year, we'll renegotiate the credit facility in the back half of the year. And then for 2019 through 2021, that we will refinance with a combination of term debt and bonds the remaining portfolio. An important part of this is we're also going to create warehouse capacity to support Wheeler Financials, an important part of that model.
So we have our eyes wide open on the capabilities. We have the cash flow and earnings to support this, and we have a plan to deliver this over the time line. If we take a deeper look at the debt portfolio, you can see the evolution from 2017 to 2018. We expect that to dip slightly here in 2019. But I want to give you a deeper flavor of the composition of the debt that's out there.
So total debt, as of threethirty one was 3,300,000,000.0 The implied financing debt is 1.1 Now I want to pause on it just for a minute because this, I view, is good cholesterol. This applied financing debt supports earning assets over the long term. So it's an important part of what we have. That would leave an implied operating company debt of $2,200,000,000.0900000000 dollars of cash and short term investments on the balance sheet for net debt of 1,300,000,000.0 Now we're realistic. I know we don't screen well on a debt profile when you look at it, but I think understanding the composition is helpful as you understand the business, more importantly, where that business is going over the long term.
So it leads me into free cash flow. So we expect that free cash flow will return to growth year over year growth in 2022. And I want to spend a minute on this because we have important sources of cash, and one of them that you've heard over and over through the units is improved earnings, great way to drive cash flow. We'll also improve working capital. Some of these investments we've made the underlying business.
And when you hear about improving NPS scores and customer SAT scores, that yields improvements in working capital as we go drive that efficiency. Now uses of cash is an important component. We want to use the cash to drive the business model. So one of the uses of cash is the third party financing. And I want to spend a second on the graph on the left hand side.
That gray shaded area is an area that's important. So you can see in 2017, that gray shaded area is up. That was actually the runoff of the finance receivables. So if you remember Chris' graph, he had that graph that was coming down 10%, 11%. That contributes cash, but that's not how we want to get our cash flow.
You can see that, that contribution is declining, and that's from two areas. First, we're doing a better job retaining those clients and not having it run off at the same rate. And then second, third party financing is going to kick in over that model, and that's going to consume cash. That's going to consume cash, and that's why we took our free cash flow guidance down in 2019. That's a good use of cash because it's building up long term earning assets for the company, and that's what we'd like to have.
Shareholder return. So total shareholder return for 2019 remains the same as the prior years, but we made an important change to that mix at the beginning of the year. So we took a dividend action, but for 2019, we maintained that return by adding a share buyback component for this year. So we'll still return $140,000,000 to shareholders through a combination of dividend and share buyback. Now the dividend yield here, we believe we're at a competitive dividend yield for the company we're becoming.
And that we believe in that for the long term. So you'll see that here combined with a share buyback and a competitive dividend to total shareholder return. Now this new mix does provide additional flexibility as we invest in these businesses. So I want to spend a minute on this chart. This is an important chart here because I want to show the components of how this comes together.
I'm going to start on the far left. The purple bar is free cash flow for 2019 for our guidance range as well as the blue bar next to it for earnings. Now if you go over the time to 2022, you can see the effect of the changing portfolio. First, you're going to see as commerce services gain scale, it's going to drive profit. And that, that revenue growth with driving profitable revenue growth, it will contribute significant earnings.
SMB. SMB now becomes a green wedge on the chart as it actually grows earnings for the 2022 period. And then software continues to grow and contribute. So that middle bar that you see is a business segment driven earnings. That's a nice change from where we are today.
But our debt here that we have out there, as we're going to refinance that debt, our rating is different. That's going to cost us more on interest expense. So we've factored that in. And then on tax, as we grow in our earnings, even with tax reform, we'll still have to pay the tax on that. And that will take us over to the far right blue bar.
So 2022 earnings. Now we expect to get improvements in working capital. And then what I just spent a minute on, on free cash flow is talking about the finance receivables. That will consume cash. So you can see the earnings down to free cash flow.
But over that time, with the changing portfolio, the investments we've made, the evolution of that portfolio that we believe we will grow both revenue, profit and cash flow over the period. So I'd like to leave you with a few takeaways. First, that this portfolio that we've set up and are driving is going to deliver sustainable revenue growth, and it's always easier to transform a growing company. This portfolio is also balanced between growth and improved profitability. We're going to continue to drive operational excellence.
As Mark said, this never ends. We're going to continue to go look for ways to get more efficient and deliver better client experience. We have a balanced investment approach between growth and delivering a competitive shareholder return. Then finally, we built the strategic flexibility to drive our valuation. So as I wrap up for the team here today, the management team, first, want to thank you all for coming.
Hopefully, what we've been able to deliver to you is a good description of how this portfolio has evolved through the transformation, through the investment in the business and a very deliberate approach to how Pitney Bowes does business. So with that, I'm going to invite my management colleagues up on stage, and we will join in some Q and A. Thank you.
All right. As
you ask your questions, if you can just raise your hand, announce your name and firm that you're
working with.
Kartik? Yes. Kartik Mehta with Northcoast Research. Mark, just a bigger picture question. We went you went through this entire presentation.
Almost every business seems to have opportunities in some way, either EBIT growth or revenue growth. And in the past, you've also shown those opportunities, but it hasn't turned into maybe the expectations that you've had and investors have had. And so I'm wondering, what is it that's going to change or what has changed that the next three years will be different in terms of how you deliver numbers and you live up to some of the things that you've put into this presentation versus the past?
Yes. I guess I would have a slightly different point of view. So if you look in 2016, we said we are poised for revenue growth. We grew in 2017. We had the fastest growth in a decade over the last two years.
Where we have struggled a touch is on the EBIT line. And I think it's for the reasons I said at the outset. As you contemplate the investments that were required in the business, we've been very steadfast in holding firm on making those investments. But as we've done that, candidly because of some of the changes we've made, it caused visibility to be less than what we thought. So I think if you sit through the last three hours and you kind of say what's different, I'd say, first, at a macro level, the company is growing already.
Secondly, as you kind of tick through the businesses, software is growing as well. That's different than before and that will accelerate. Underneath that, the partner channel continues to mature. GFS, we have a whole new set of capabilities that candidly we've spent two years investing in. We're now in the market with those opportunities.
And perhaps what is most exciting in some ways is the revitalization of the SMB business. And you think about the opportunities that we're now poised to go after, that doesn't happen overnight. You have to make the investments and sustain the investments in the product development, the brand and other things in order to have those opportunities. So I hope you don't walk away with this is on the come. There's plenty of proof points that you see right now that should substantiate the case.
Hi. When will be the first year that your earnings will be higher than the year before?
Stan?
So we're not going to go give guidance by year here. I think if you look, you'll see the proof points along the way. So first, Viola talked about being profitable next year. Then Jason talked about having year over year profit growth in 2021. So you guys are good at math.
I'll let you run your models for where you think that plays out. But if you look at that second to last chart that has 19 to 2022, I think it gives you a good flavor of where we're at over that long term. And that's earnings expansion and free cash flow expansion.
I think there's a trajectory to how the story unfolds. And that is the first thing you got to do is you have a point of view where you're going go. We have that point of view, and it's around shipping and enabling technologies. The second is you've got to make the investments, investments that build the capabilities, but also investments that get the scale. I mean if you look at the trajectory of Amazon, I don't mean to compare ourselves to Amazon at least, that took them ten years.
It took Apple twenty years to kind of build the franchise. We're not going to take ten or twenty years. We've pointed to where we are in that path. But when you're going through a transformation and you're trying to build scale, the worst thing you can do is try to move to profitability too fast. I mean if you think about those kinds of businesses you have, we could do things to produce an inferior client experience, to tap down the investments, but it doesn't produce the result that you want for long term.
And if you want to be clear about one thing as you think about investing in our company, we're not going to make that trade off that impairs the long term for a year. We still don't do it.
Anthony Lebiedzinski from Sidoti. So on the Global Ecommerce, as far as the target EBIT margin change, is that mostly just a mix issue? And also relating to global e commerce, I think you talked about getting more clients, doing more bundling more effectively. Can you give us an example of that,
Sure.
Mark, do you want me to take that one?
Yes. I mean the first part of the question is, yes, it is. So if you the overall long term margins change from 10% to 15% to eight to 12%, but the market opportunity doubled. And as you contemplate the market opportunity as we see it now, it comes with less margins. That said, a market opportunity that's twice as big should bring with it more absolute profit dollars.
So I think you can kind of get fixated on a particular variable, but the overall market is continuing what we see consuming. I'll let I will talk about clients.
Yes. So on the bundling, just to put it in perspective, if you look at our pipeline today, our sales pipeline today, just over half of it are bundled opportunities. And what that means to us is in the conversation we're having with the client, we are seriously talking about more than one service from Global Ecommerce. So examples of that could be, where traditionally we would have sold returns, we're selling returns plus delivery at the same time. Where we would have traditionally sold delivery, we're also talking to them about PurePost, which is our shipping API product.
Many retailers access, for example, Priority Mail from the postal service for a portion of their packages. We're bringing that through our technology layer by bundling our delivery service with our shipping API service through a single technology interface. Could be that we're bundling border free or cross border retail platform with domestic delivery. So, there's a bunch of different flavors inside of there. But think of it as we're out having conversations with more than half of our opportunities about more than one of the services in our portfolio, which means every new client we bring on has a lot more value attached to them than what you would have seen from us a year ago or certainly a year before that.
It also has a subtle but profound difference in that the kinds of conversations you have with clients when you have a broader relationship with them is different. You call in different people. You have a more sticky relationship and some more economically there's more economic opportunity around those relationships. Shannon?
Thanks. Shannon Cross, Cross Research. I have a couple of questions. Stan, can you talk and I apologize,
my voice So
Stan, can you talk a bit about balance sheet in terms of the debt that's coming due over the next few years? I know you're pointing to cash flow growth, but cash flow has been declining for several years. You're you made the decision to buy back stock and which obviously bondholders don't always look at favorably. So I'm just curious as to how you sort of balance your expectations in terms of refinancing the debt and maybe how some of your conversations have gone?
Sure. So first of all, let me start with the share buyback. We did that and committed to that for this year in 2019 to give a transition year as we made the dividend change. But as we think about the balance sheet and the debt, we broke out that component of the debt and showed the implied financing debt that goes with that. We spent a lot of time both internally as well as with our banks on what we're doing on the refinancing.
So we're confident we'll be able to refinance that debt. But I did show you the realities of that in the second to last chart is going to be higher interest expense. So we built that into our long term model. But we think with our profile and the cash flow of our profile that we're competitive in the area that we're at and we'll have the ability to go to market and solve that.
Okay. Thanks. And then I had a couple for Lila. I'm curious, we met with you a few weeks ago and since then Amazon came out with their we don't care about money, we're going to spend $800,000,000 on one day shipping for free. Again, Amazon has been a great stock.
So but I guess, how do we think about that in relation to what you're offering with a three to five day? And how are your retailers thinking about that? And then I'm also curious, Amazon also made the decision yesterday, I think, to stop holding inventory for some of their marketplace partners. And I know you don't want to hold inventory, but I would think it might level the playing field a little bit.
So curious as to how you think about that. Yes. So the first part is it's a great question. The first part I should have probably talked more about in my remarks. We recognize three days is not one day.
Okay. So it's not as if we're pretending that a three day network is exactly the same as a one day promise. But the reality is Amazon is roughly half the market, everybody else is the other half. The way that Amazon gets to you in a day is that they have a distribution center within 20 miles of every one of our houses. And I guarantee you, if we had clients that had that much scale and could get product within 20 miles of every U.
S. Consumer, we could also deliver a one day service. The reality for the rest of the world, the rest of the retailers is that they don't they aren't big enough, they don't have enough scale to split their inventory into hundreds of distribution centers nor would that make sense for them. So the majority of retailers and particularly the ones that we target in that kind of mid market size space are fulfilling out of a single distribution center typically or two. And so, for those clients today, our service already reaches 75% to 80% of consumers in three days, which is an attractive enough value proposition for consumers who like and appreciate that brand.
The problem is it doesn't get to the other 25%. So, first task is to get faster so that every U. S. Consumer can be reached by the call it the average retailer in three days or less. We think that's an important step forward.
And all the consumer research that we've done would suggest that yes, consumers are excited about a one day promise, but most consumers will wait three days, particularly if they really want what you have to offer and most brands who are Amazon have things that we go to their site specifically. The things that are a little bit harder I think and where I think we'll see a lot of the Amazon one day service is consumables. The things that you're most likely to need or want the same day or the next day are toilet paper and dish soap and the kind of stuff that our retailers aren't really selling, right? We tend to be focused on fashion and beauty and jewelry and things that are differentiable. And therefore, you're willing to wait three days, no longer are you willing to wait five days or more, right?
So, I think it's leveling the playing field. It's not perfect, but it's getting us into the zip code of what the Amazon offer is and most consumers will say, I like what you're offering, I'm willing to wait an extra day or two for it. And again, the three days is to 100% of consumers as we speed up the network, some large proportion of those consumers will get things in one day and in two days. So depending on where that distribution center is, think of it as a one day local model, a two day regional model and a three day national model. So you'll see that consumer promise get more attractive across the board.
So that's sort of the first piece of it.
On
the second piece, I think Amazon is shifting more away from the retailer model in some cases to the marketplace model. I don't think that aspect of their shift impacts us in any material way.
We have a strategic belief that's pretty simple. First, I have tremendous admiration for what Amazon has done. I mean, you can't help but admire it from any rational economic perspective. But at the same time, we have a strategic belief that the whole world is not going to go Amazon. I think that was probably affirmed yesterday in their announcements to what they their new arrangement with small businesses or lack of arrangement with small businesses.
Interestingly enough, I mean, the juxtaposition was moving to large brands and larger players. I think there's, I mean, going to be a natural reticence if you're a large brand or a large retailer to move your future to Amazon. And what they were mute on was private label. And that is kind of the undercurrent of all this. So if you believe that Amazon gets to 100%, then this is kind of a different ballgame.
So for that part of the market that they don't attract, the question becomes how is it they provide something close to what Amazon can do. And we think we've got the best chance to be that alternative. There's very few others that within an e commerce network can provide two fifty million parcels of scale, and we're on our way to doing it. So that's kind of the underpinnings of the strategy that we believe. In the middle row here.
Jordan Heveritt from Barrington Capital. Been a pretty major disruption in the business of stamps.com recently their relationship I'd with love to hear your take on what that means to you. Does it in any way mean an opportunity for you? Or alternatively, is it some trend that could also be negative for you?
I'll start and then I'll let Laila and Jason jump in. Obviously, we watch closely what others in the industry are doing. The first thing I would say, and again, this is subtle and to a degree, I think we got some level of criticism when we began our Global Ecommerce effort because Lila had a strategic belief. Again, I'll render these strategic beliefs clear so you can make judgments on them, that it was important to have a broader relationship with the client than just an API based strategy. So if you think about that, what we call the honeycomb chart, which is kind of that API first entry point and all the stuff behind it, all that stuff behind it comes with investments, different margin, different and people looked at us and said, why wouldn't you just relationship with them?
And we said, well, we think you can have a fuller, more economic, more enduring relationship if you've got this breadth of capabilities. I think that strategic belief is bearing out in the marketplace. So that's point one. Point two, they made a very clear statement that they were moving away from the USPS. That's a strategic choice.
That's a strategic choice that we're not going to make. But then you've got to make the judgment about what you have to offer to others and how compelling that is or isn't. The part that's an opportunity for us is they talked about raising their prices to their clients. So far, we've seen no evidence of that. At least last time I checked, we hadn't seen any evidence of that.
If they begin raising their prices to their clients, then that creates an opportunity for us to have a different kind of conversation, and I would say a fuller conversation than we've had before. Those relationships that they have with those clients were pretty sticky. I mean, so we've made our API business has grown tremendously over the last couple of years. It's gone from zero to over $100,000,000 pretty fast. But that said, sams.com had something that was clients were reticent to move away from.
A price increase might cause them to rethink that dynamic. So Lila, I'll let you elaborate.
I think that's well said. The only thing that I would add is their business model was built solely on a margin sharing relationship with the Postal Service and the Postal Service has taken part of that margin back. So the I would think about what's happened to them. Our relationship with the Postal Service and our clients, as Mark said, is much deeper and is based on a lot more value that we're providing. And so it gives us the stickiness, the ability to add on services that physical touching of the parcel actually saves the post office money, right?
It is an advantageous to them when we're a work share partner and we're doing physical work on their behalf. That is a cost savings for them and then that's reflected back in the relationship that we have. So the value we're creating for them and vice versa is greater than what it is, I think, in the Stamps model. And that's why from our perspective, there's always more opportunity because that's more enduring.
With the economic pressure on the Postal Service, if you don't have a bilateral relationship that produces profit on both sides, you're at risk. And as you look at the relationships we have with the Postal Service, we believe that we've got seven different NSAs that all have different expiration dates. But as interrogate every one of those NSAs, the commercial agreement between you and the Postal Service, we're very convinced we've got strong economic underpinnings of all those relationships. So they may evolve, but we believe based on what the Postal Service has said and what we know that those are very compelling economic agreements, not just for Pitney Bowes, but also for the Postal Service. And by the way, one of things we don't understand is we've been multivendor for a long time.
So this notion that you have to be multivendor is something that we understand. Why you would do that and walk away from the postal service is something you'd have to ask them about.
Yes, thanks. Just to follow-up on some of that in the e commerce side. So in that segment of the market away from Amazon, I would think that the headline competition is UPS and FedEx. So I guess my newer to the story, but why are they coming to you guys? And how does that competition they've obviously got massive scale?
You You said not many people can do it. I mean, they are the other two people that can do it, I suppose. So how is that competition? How do you face off? How's that sale pitch
progressing? Yeah.
We compete with them every single day is the short answer. And we win the three reasons I said before. We are not going after the delivery business of the largest retailers in the country. Would be insane, right? So, where they win and where they are aggressive is with very large retailers.
We're focusing in the mid market. So think about retailers who you probably know the name of, but are a lot smaller in terms of their volume. And what happens to those retailers with a UPS or a FedEx is a couple of things. Number one, there's no consumer focus by those carriers vis a vis those particular clients. You are fitting into a network architecture that they have built.
So you may have all of your orders come in because you're more West Coast focus, they may all come in between noon and 4PM and you want to cut off time at your fulfillment center of 5PM, because then you can have a better delivery promise. When you talk to us, we'll talk to you about what that means and how we can make that work. When you talk to one of the larger providers, they will tell you we pick up at two, we will be there at two. And you try to negotiate something that's flexible, but they're solving a different problem, which is network efficiency. They're not worried about you or your consumer in the mid market.
If you're one of the top 10 retailers in the country, different story. That's why we're not going to play there. So part of it is that focus on the consumer and the fact that our network is built with the flexibility to handle some of those requests that are a little bit more specific that tend to get ignored at that level with the large carriers. So that's one piece. The second piece is this notion of your brand.
So if you are a UPS client, they want you to use their tracking service. You've all experienced this as a consumer. The tracking emails typically come from UPS, not the retailer you bought with. It might or it might not have an eight point font at the bottom, this is an order from retailer X. My household typically says which one is that, because we're ordering enough online that we are confused about which UPS package is coming tomorrow versus the next day.
Our focus there is on branding that consumer experience around the client and the retailer and their brand. So it is absolutely clear what you bought, who you bought it from, when it's coming and why you love that retailer. That doesn't resonate with every retailer. But for retailers that, to Mark's point, don't want to be on Amazon, right, who are building a brand for the long term and who believe that their special sauce is whatever they've built their brand around, whatever lifestyle they want you to feel like you're a part of, that's a very prominent value proposition. That's one example.
There are several others. That notion of putting the client's brand first, we win on that all day long. And then the last one is this idea of data science. We're able to bring technology and data science. We're able to bring technology that's easier to integrate to.
That is we're willing to do a little bit of customization to make it work for you. We're willing to help your technology team, which is probably pretty small and underfunded do the integration, right? Those are value propositions around the technology that you won't get from some of the larger guys if you're in that middle space. So I'll go back to one of the things I said earlier. We know that they will be bigger than us forever and they can out price us every time.
Right? I don't want to play that game. We're participating in niches in the mid market with clients who appreciate and are willing to pay for the value that I just described.
The other aspect is when we think of ourselves in that particular equation, we think of Pitney Bowes plus the USPS in the scale that they have overall. So we tend to think of it in a little bit different way than just pitting those against UPS or FedEx. We think about it more broadly.
John Moore from HSBC. So just in terms of e commerce profitability, profitability EBIT profitability from here, would you expect it to be pretty much of a linear march on scale to that profitability and beyond?
Go back to Slide 83. I mean, I think what Slide 83 shows is it's not I think if you look at the history of platform businesses, they kind of go like this. And then when you get to scale, they tend to have nonlinear growth. And then they go back to linearity once you get to scale. So if you look at it in your respective books, I think it's on Chart 83 as I looked it up as I was expecting the question.
That's kind of what we expect, and that's kind of what we saw in our pre store business. That's candidly what Amazon saw as they were building platform businesses, and that's kind of true to every other platform business as well.
Okay. And then for the third party financing business, is there a target mix of Pit de Bo's equipment versus third party that you're looking to achieve? Or does that play into how fast you ramp that business? Thanks.
So in terms of the mix, for the third party for Wheeler Financial, that's going be exclusively third party equipment finance. As it relates to the captive finance business, we will stay and remain focused on our SMB financing as well as some of the other aspects that I shared with you on that circle chart early in my presentation. We'll keep those two independent and separate with the management team that sits over top.
The way I would think about when you think about the finance business overall, From here to 2 or $300,000,000 we've got a fairly inexpensive deposit base where we're advantaged to go after those markets from an economic perspective. So we've got deposits that are much better than market rates. As you get above that $300,000,000 then I think how it is that grows and how it is you think about does that retain on your balance sheet or do you syndicate that, that's to be worked out.
Thank you. My name is William Mansfield from Vibro Capital. I had two questions on two different topics, if you don't mind. The first question on e commerce. I think you had a slide up where you're talking about going from the volume of 110,000,000 to, I think, was two thirty million or two fifty million packages over the next four, five years.
Can you do that without acquisitions? And sort of what's the level of CapEx investment that you need to go from the capacity you have today to that future capacity?
So I'll answer the growth question. I'll let Stan talk about capital. I'll stay in my swim lane. I think from a growth perspective, we did say $250,000,000 so $110,000,000 in 2018, dollars $250,000,000 is the exit rate coming out of 2022. That's just on the domestic parcel business.
So our delivery and returns based on our current growth rates that you get there. So we don't have to do anything extraordinary from a growth perspective. We just need to continue to deliver what we're delivering today in that business. So no acquisition required to get the volume. We do need to continue to invest in the network to handle that capacity.
So I'll let Stan talk about the
Yes, couple of points. First, I wouldn't preclude an acquisition from there if it makes sense and it adds to synergy and long term that's something we would certainly consider. From a capital perspective, I think our capitals when you look at it, it's easy to kind of fall back and say, well, it hasn't changed dramatically. Underneath the covers, it's changed a significant amount on where we're putting that capital, and it varies year by year. So for example, last year, we doubled Presort's capital and this year, we're digesting some of those investments as we roll out the technology.
So you're going to see that shift. So I think within the envelope that we've talked about, we've included the capital required to build out the capacity needed to get to that level of parcel.
The one thing I'd say about acquisitions, just to make a different point, is we'd love to make an acquisition if it made economic sense. We don't see acquisitions out there right now that make economic sense either from a price perspective or a risk perspective. So if that changes, then we become more acquisitive. But I don't like how the assets are priced right now.
And then on the second topic on the Financial Services business, perhaps a technical question, but all the profitability, all the financial reporting of that business, is that in the SMB line? Is that in the North America mailing line?
So it rolls up into the external reporting segment of SMB. And so there is a par as we talked about earlier, a part of that pivot back to growth in the overall SMB business.
I just wanted to kind of follow-up on the debt refinancings. Just a couple of thoughts. In 2019, will you be buying back shares considering that you have these debt refinancings coming up? And if so, at this current environment, what kind of a rate So what kind of an increase?
So you do have some decent amount of debt. So I'm just wondering why you would buy back shares since you've cut the dividend in the past. And so I'm just trying to understand maybe how you want to use your cash and why the approach?
So I just want make sure you said for 2019? Yes. Okay. So we've already announced our share buyback for the year and said that we would spend roughly $100,000,000 on share buyback. If you think about the return to shareholders we had in total was $140,000,000 in 2018.
We said we would equate that in total for 2019. We're not committing to future share buyback. The At $140,000,000 level, that would leave us $21,000,000 of additional authorization. Candidly, we think our stock is undervalued right now. So we think it's a good buy for the company as we look at that.
And I think it still leaves us the right capacity to go ahead and do the refinancing that we have to do for 2020 and 2021 as we look out forward. I'm not going to talk about the rates necessarily. You can go look at the rates for our ratings class. I don't necessarily want to give all the banks here what I'm willing to pay.
I guess, based on the conversations you have, you seem pretty confident that the refinancings will be completed. Do you think we'll have some finality this year? Or is this going to leak into next year?
We have a path out there that we've laid out to do those refinancings. Given where we're at, we probably will start earlier than we might have in the past. We talked also about renegotiating our credit facility here in the back half of the year. So we'll start earlier, but we think we're on a good path with a good plan. I got a great treasury team, so I'm not worried about it.
Evan Behrens, Behrens Investment Group. Looking at Page 83, maybe this is another way that we can look at the global e commerce business. What is the 2022, 2025 when you look backwards? What is the expected return on investment that you are looking for? And how do you go about benchmarking that along the way?
So I can start here. So when we go out to do investments, we have an investment committee that we go through and evaluate because it's not first come, first served. And several of the members here sit on that investment committee, but it's not first come, first serve. So we have a hurdle rate for IRR, which is a very healthy hurdle rate. We're very disciplined about how we go about looking at that.
So if we were to look out forward to 2023 or 2025 and declare what was success, it would be exceeding that hurdle rate and making sure that, that brought the right benefit to the company and was for the long term value. We do turn down a number of capital requests that come in because they don't meet that those categories. So for example, as we talked about the sorters and presort was one of the examples we gave, that when we looked at that, we looked at what the hurdle rate was, could it exceed and it did. So we made that investment, and we were doing things like five for three, take out five, replace for three. But we don't stop there.
We actually go back as part of a disciplined process, and we go back and look at what return did we actually get on that investment. And if we look at those refreshes we just did, Lila and I just went through this a few weeks ago, all of those, with the exception of one site, have exceeded their IRR that we are looking for. We use that then to tune what we look at going forward. So it's not just that because Lilo's business is growing the fastest right now that gets all the capital, and that's far from it. We are making trade offs across the businesses to do that.
So we have a very disciplined process. We look at it in hindsight, and the Board looks at the larger ones as well. And the leaders here will come back in and report on the success or not of those investments.
I think there's a temporal dimension to your question. So if look at that if I remember the chart right, I may have given you the wrong page number, I don't think so. So you think about return on capital in Commerce Services and Global Ecommerce differently until you get from where we are today to scale because the if you go back to one of Stan's concluding charts and you look at the incremental cash flow and incremental profit that comes from Commerce Services over the next several years, it dwarfs SMB and software even though those businesses add profit. Once you get into steady state, then that dynamic changes. But the point that I would make is if you look at the cost of adding a node to the network and by the way, Presort has 38, Lola?
38.
Yes. 37 nodes to the network. I think when I joined, it had 37. There's not once you get a network that's kind of upscale and has the right geographic footprint to it, there's not big capital investments. But even if you do, if you've got to add a node to the Commerce Services network, I mean, much does a node cost?
I mean, it's not big money.
It's not big numbers.
I suppose I'm looking for more specificity. When logistics and border free were purchased, let's call that $900,000,000 of capital, there's additional capital. As an investor, looking out longer term, ten, twelve, whatever years, when you sat in front of the Board, there was a return hurdle expectation. Are you from an investor standpoint in 2025 or 2022, wherever this line starts to get to scale, Is it a 15, 18%?
Yes. So I'm sorry, misunderstood the question. So yes, mean we've said this before. Our expected required not expected our required return on any acquisition is 15% IRR, and there's a couple of other characteristics that go forward, and we would expect all those investments to conform to that over time.
So it's fair for us to pick a date out in the future and extrapolate that based on the capital that's been committed to the business?
Yes. Not we tried to lead you to that today, I mean, and we may not have done it quite as precisely like that. I think it's not only fair, think it's appropriate. Okay.
Thanks.
Mike Shore with Darsana Capital. I had two questions, Stan, for you and then two on the SMB. Just the first one is, do you guys you talked at the end of Q4 about potential impact from kind of the rising tariffs, and then you didn't mention it again on the Q1. I'm just kind of wondering, is that still an issue? Do you guys have is there kind of an incremental potential hit to earnings this year?
And then second, just to be clear on the share repurchase. I know you've talked about the $100,000,000 this year, dollars 40,000,000 dividend. But is the 100,000,000 kind of is that the commitment that you will do that this year, you'll complete that and it will be a kind of a total return of $140,000,000 for the year?
Yes. Two good questions. So first on tariffs. What we've baked into our guidance is a 10% tariff. So an incremental to go to 25%, which is where we would fit in, and we are seeing that in the quarter, would be an incremental impact to us.
So we talked about that as we gave out our annual guidance here. Now since our last earnings call, we've seen that tariff go back up. Now we're not standing still. We've been working with our suppliers for several months to try to reallocate the supply chain and redirect it so that we can minimize that tariff impact. But it's clearly going to be an impact if it stays at 25%.
So we're doing things to try to mitigate that, but anything above the 10% would be an impact to what we're looking at. Now we look in the grand scheme of things, it's not huge dollars on a full year basis. Let me go to the second question. On share buyback, we've said that we would spend $100,000,000 and we are looking to spend $100,000,000
And the authorization is a little higher than that? 121,000,000
is the total authorization. So you'll have some
20,000,000 from a previous authorization.
So you'll have some going for next year. And then on the SMB kind of guidance or kind of long term trajectory here, just to be clear, is 2021 is kind of 2021 over 2020, that's when the growth is? Or is it 2022 over 2021? And maybe just wasn't clear on that. And the second part of that is kind of how will you actually get there, meaning are you suggesting that gross profit won't be declining in SMB anymore?
Or is it kind of an operating expense issue? Just kind of would love to kind of what will that actually look like for the SMB P and L?
Yes. I'm going to start or you want Yes.
Why don't you start and I'll Yes.
So just to be clear,
the statements year over year, EBIT flat or better in 2021, right, so compared to 2020. And the answer to your second question on how is yes to all of the above, right? So we think we have certainly lots of opportunities around operational efficiency. That notion of simplicity, simplifying the portfolio, just like we take complexity away from clients, we got to do a better job of doing that ourselves. We think we have a broader mix of offerings and capabilities now to bring to the market that I think are going to be more compelling and allow us to not only retain more of our clients, but to acquire new clients at a faster rate and pace than we've been in the past.
And then you start to think about the other things that we talked about, those other adjacencies. It's a real opportunity for us to monetize. I mean, the Wheeler Financial piece is just the most evident example of that. So it's a little bit of everything that gets us there.
I think if you look at over the last eighteen months in SMB and look at every line on their income statement, it reflects that already. So as we've stabilized the gross profit margins and the streams have been normalizing out, which is why we see that rate of revenue decline moderating. And when you go look at the operational efficiency, both the SG and A and G and A have improved over that time. Remember, they're our biggest segments from a profit point of view. So they carry a lot of the overall allocation.
So as we simplify the overall company, given they pay for a big chunk of that bill, they also get a big benefit from there.
Right. Just if you look at the mix of the business, so as we move more to the financing business, the profitability or the gross profit of the financing business, just mix up. So that as that becomes a more important proportion of revenue, that helps gross profit. And then I continue to point out to my colleagues in SMB, Dell's SG and A for their small and medium business. Now our small and medium business is slightly different, but we've made good progress becoming more efficient.
So it's not something that the team is standing still, but they've there's more to do. And for example, in Europe, we're basically taking a clean sheet to our European structure to ensure that we've got a structure that's kind of right sized for where the business is going forward.
Stan, are you committing to just on that, it wasn't in the numbers necessarily, but you talked about the scale on the SG and A as revenue grows. Is there kind of another cost out program that you're extending or you're hitting through the 2021, 2022 plan that wasn't clear from the presentation?
Yes. We're driving an overall 500 basis We continue to take out spend. Candidly, we've done that over a period of time. So if you looked at last year, we took out over $150,000,000 of gross spend, invested part of that in the business.
We're going to continue those optimization and efficiency efforts. And that cuts across the company. It's not just shared services as we go to look at that, but we think there's opportunity, and we do what you'd expect us to do. So we're benchmarking the activities. We're looking at other companies to say how are they operating.
And candidly, we're yielding off the investments that we've made in our own systems. So things like as we invested in an ERP with a new leasing system for North America back a few years ago, we're yielding results on that. Candidly, that helped us enormously as we went through the leasing accounting change that went into play 1.1, and it's allowed us to operate a lot more efficiently. So we're going to see gains off of that. We are going to reduce the spend in our overall shared services and corporate spend.
We're getting more efficient across the board within the units.
Kurt, guess, a question at the outset, which I think is an important question, what's different? And I'd point to the business platform in particular, I mean, we spent a lot of time 2013 to 2016 investing in that business platform. We implemented and deployed it in 2016. It was disruptive. It was disruptive to our business, but it's behind us.
And now we're yielding the benefits that we said we were going to yield, the $120,000,000 of benefit a year enabling what we're trying to do in SMB with having devices that are connected to the Internet, enabling what we're doing at Commerce Cloud. It's, I think, kind of an instructive data point for the investments we've made, the disruption that we have incurred and now being on the other side of many of those investments in disruption.
Couple of questions relating to cash flow. So you mentioned that the third party financing program will have an adverse impact of 50,000,000 to $70,000,000 this year. How should we think about that 2020, 2021? And also, wondering what are your long term CapEx expectations Sure. In
So thanks, Anthony. So as we think about the cash flow implication, there's going to be a couple of items as we look there. First, if you think about the 50,000,000 to 70,000,000 that we have in our guidance this year, we want Christopher's business to grow successfully, but we're going to do it in a controlled fashion. We're going to do it with assets that we understand, and to take the appropriate amount of time. So while we look at our trajectory, it could go up or down depending on what we see in the market.
I think you should look at that level that would accelerate slightly. But as we grow into this, you're also going to see after a period of a few years that now that portfolio will start to turn and be able to fulfill part of that. So we'll fund that through various vehicles. We have excess capital today in our bank. Then we would go to market, and that could be in the form of brokered CDs.
We have the ability to syndicate. So there are numerous options available to manage that. So we purposefully haven't drawn a straight line out on this. We want to do this in the right way as we run out and grow that business. So from a free cash flow, that's where we kind of look at from that component.
What was your second question?
Just overall looking at total CapEx for the next Sure. Few
So I would expect CapEx to grow slightly, but I'd go back to the mix underneath of what we have. That mix changes fairly significantly on a year to year basis. So we'll have and I think you should think that it grows maybe just slightly faster than revenue on some years and a little bit lower on other years. You're not going see dramatic step ups. But when we look at that underneath, we set up we've just done a net five addition in the last year in Lila's business for new additions.
But I think there's opportunities here to save CapEx as well. Consolidating our logistics and presort facilities saves a fair amount of capital as we look at that. So we look at the entire equation, not just the incremental adds, but we're going to look at where we can also save money. Presort, as we add those sorters and slivers and other automation, that's not every single year. That's going to ebb and flow.
And then in Jason's business, as we add capital, as we do new product launches, that's a heavy capital year. And then candidly, the following years will come down fairly significantly. So I think you should think about that kind of ramp on the capital overall.
So one last question and we'll conclude, get you guys out to lunch.
Hi, Stan. This is a question for Stan. I guess I just wanted to follow-up on the chart on 01/2009, just talking about the debt profile. It sounds like that your intention is to refinance really sort of keep the gross amount of debt and potentially with the efforts on the Wheeler potentially that could even grow a little bit depending on the needs there. I guess my question really sort of centers around if you think about the comment that I've gotten from Adam and other investors as sort of the gross debt as being a sort of a threshold issue for investors or we think about it from the perspective of the rating agencies that maybe it didn't really dug into it, but it sort of seems like this net gross isn't really resonating.
Do you have any thoughts in just in terms of like reducing the net or the gross and even if the net sort of stays the same?
So let me answer that question on. If you go back and look at the portfolio evolution that we've had, we've taken opportunities to address that debt load over time as opportunities present themselves. So not just free cash flow, but if we were to divest other areas of the business, we've demonstrated the ability to reduce debt through that vehicle. We've looked at the free cash flow to reduce that debt load. And then as we refinance over time, that will smooth out some of the debt maturities.
But on the evolution, if you look in one of the charts, if you remember that revenue chart, the far left hand wheel had production mail. So we divested that business and used the proceeds to pay down debt. When we did tax reform and we were able to repatriate non U. S. Cash, we used the majority of those proceeds to pay down debt.
So we'll be opportunistic to look at that. And if there are other areas of business that aren't consuming that cash, that would be a logical place for us to prioritize to reduce ongoing debt load.
I would just use that question to kind of wrap up. First of all, thank you for your attention this morning and your interest in the story. We obviously have a lot of conviction in what we're doing, and hopefully, that came through this morning. Last year, we talked about the transformation of the company. We also talked about a changing investment thesis and value proposition from a company that was declining for years that was clearly attractive to a cast of investors, value investors.
What we said last year was we were pointing towards an investment thesis that evolved as the company evolved to growth. You saw that last year with the growth in 2018. You certainly, as you contemplate what a growth investor looks like and what they're attracted to, we believe the stock, as Stan pointed out, is certainly at a reasonable price. And I would go on to say that while I generally believe in the efficiency of markets over time, this particular time, I have a hard time rationalizing this particular So I wanted to conclude with who it is we're trying to be from a company perspective because that has very clear implications for the different kinds of investors that think about the company.
So the story will continue to evolve. We look forward to continuing to have this conversation with you. But we've built something that we think has got a lot of legs. So thank you for your time this morning. We look forward to seeing you soon.
Thanks, Adam.
Thank you, guys. Appreciate it.